Dollar gets boost from U.S., German data

Thu Feb 23, 2012 4:47pm EST
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar climbed against the U.S. currency on Thursday as upbeat U.S. labor market data spurred investor optimism the world's top economy was slowly mending.

The U.S. data showed new claims for unemployment benefits held at their lowest level since the early days of the 2008-09 recession.

"The continued improvement in the trend in initial claims is helping the mood a little bit today," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets.

"You're seeing broad U.S. dollar weakness across the board so there's a somewhat risk-on environment with stocks modestly higher. That's of course helping the Canadian dollar," Reitzes, said.

The Canadian dollar finished at C$0.9976 against its U.S. counterpart, or $1.0024, up from Wednesday's North American close at C$1.0004 versus the U.S. dollar, or 99.96 U.S. cents.

Adding to the market mood was upbeat German data, which helped the euro rise against the U.S. dollar and eased concerns somewhat about a bleak economic outlook for the euro zone. The price of oil, a key Canadian export, also lit a fire under the Canadian currency. <MKTS/GLOB> <O/R>

However, markets remained wary about possible problems implementing Greece's bailout plans. As well, broader concerns over the economy were also borne out by European Commission forecasts showing the euro zone would contract this year.

"The European developments themselves speak to a positive and a negative reaction in the currency space. We've seen a better than expected German Ifo, which gave the euro a bid to a new calendar high and some of that optimism pulled back on the downsized forecasts coming from the EU," said Jack Spitz, managing director of foreign exchange at National Bank Financial.   Continued...