Canadian dollar strengthens to two-week high on Europe hopes

Wed Jan 18, 2012 5:30pm EST
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By Jon Cook

TORONTO (Reuters) - The Canadian dollar firmed against its U.S. counterpart for the third-straight session on Wednesday as reports of International Monetary Fund efforts to tackle the euro zone debt crisis boosted sentiment.

International developments overshadowed the Bank of Canada's quarterly Monetary Policy Report and a press conference by Governor Mark Carney in which he made clear he would not raise rates solely to slow the hot housing market.

The IMF is seeking to boost its funding base by $600 billion to lend money to countries struggling with the fallout from the euro zone debt crisis, international financial sources said.

The reports helped global stocks and commodity-linked currencies to move higher.

"What you're seeing is a fairly steady improvement in sentiment in terms of the global economy," said Craig Alexander, chief economist at Toronto-Dominion Bank.

"News that the IMF will have additional resources to deal with the fiscal crisis gives people greater comfort there is some underlying safety net that can help catch Europe if there's a problem."

The Canadian dollar finished at C$1.0112 to the U.S. dollar, or 98.89 U.S. cents, up from Tuesday's finish at C$1.0152 to the U.S. dollar, or 98.50 U.S. cents. The currency hit its highest level in two weeks.

Investor risk appetite remained healthy following economic numbers on Tuesday from China that suggested officials may try to boost growth in the near term through more stimulative monetary policy.   Continued...