Loonie jumps on report of Europe debt progress

Tue Oct 18, 2011 4:32pm EDT
 
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By Andrea Hopkins

TORONTO (Reuters) - The Canadian dollar ended higher against its U.S. counterpart on Tuesday in volatile dealings, emboldened by a British report that suggested European leaders were making progress on the region's debt crisis.

The euro rallied against the safe-haven U.S. dollar and Japanese yen, and commodity-linked currencies including the Canadian dollar followed, driven by a news report that said France and Germany have agreed to enlarge a euro zone rescue fund.

"Details are sketchy but the story is that they are making some progress on this rescue fund ... and markets are desperate for positive news on the euro," said Shaun Osborne, chief currency strategist at TD Securities.

"This is just another tape bomb that has landed on the markets in relatively late trading here to induce a little more volatility in the day's proceedings."

The Guardian newspaper reported that France and Germany have reached an agreement to increase the euro zone's rescue fund, called the European Financial Stability Facility, to 2 trillion euros from the current 440 billion.

The Canadian currency CAD=D3>, already boosted by higher oil prices and a rally in North American stock markets, surged on the news late in the day.

It ended the North American session at C$1.0144 to the U.S. dollar, or 98.58 U.S. cents, well above Monday's North American session close of C$1.0221 against the U.S. dollar, or 97.84 U.S. cents.

Stronger-than-expected U.S. economic data also helped fuel the market reversal. U.S. producer prices rose at their fastest pace in five months in September as the cost of gasoline surged, but the small gain in core prices suggested the increased price pressure was unlikely to be sustained.   Continued...

 
<p>A Canadian dollar coin, commonly called a "Loonie" and an American dollar bill are seen in this staged photo in Toronto, March 17, 2010. REUTERS/Mark Blinch</p>