TORONTO (Reuters) - The Canadian dollar had its biggest one-day rise in a week on Tuesday, gaining along with the euro against the U.S. currency, as strong Chinese metal demand and a bullish forecast by aluminum company Alcoa raised hopes for global growth.
Alcoa Inc (AA.N) posted revenue that topped expectations late Monday and paired with Tuesday data that showed a December surge in Chinese metal imports, including a record high for copper, helped restore faith in riskier assets. <MKTS/GLOB>
"The Alcoa earnings gave the market a little bit of heart," said Shane Enright, executive director, foreign exchange sales at CIBC World Markets. "Risk generally across the board is improving and Canada has been a beneficiary of that."
The Canadian dollar ended the North American session at C$1.0170 to the U.S. dollar, or 98.33 U.S. cents, up from Monday's North American finish at C$1.0229 to the U.S. dollar, or 97.76 U.S. cents.
That was the currency's biggest one-day gain against the greenback in a week. The Canadian dollar at one point touched C$1.0155, its strongest level since January 5.
On the domestic economic front, a report showed Canadian housing starts climbed more than expected in December, even as analysts predicted the once-hot sector would cool further in 2012.
"It would be a stretch to say that that's what's driven Canada stronger, but it probably didn't hurt either," added Enright.
Also on Tuesday, Finance Minister Jim Flaherty announced the upcoming federal budget should not contain "risky" new spending schemes that could increase the deficit.
Despite the Canadian dollar's rise, the currency is still seen as vulnerable to global developments. These include government bond auctions on Thursday and Friday from Spain and Italy, two countries at the center of the euro zone crisis.
"The market is still very fragile on the risk front," said Enright. "We haven't seen anywhere near enough time in terms of a positive swing in sentiment to suggest that this is the beginning of a bigger movement."
Canadian government bond prices dropped as investors exited the safe haven market to pursue riskier assets, with Canada underperforming U.S. Treasuries. <US/>
Canada's two-year government bond fell 5 Canadian cents to yield 0.971 percent. The 10-year bond fell 20 Canadian cents to yield 1.98 percent.
Editing by Jeffrey Hodgson