Loonie rises with North American tide
By Frank Pingue
TORONTO (Reuters) - The Canadian dollar closed higher versus a rallying U.S. dollar on Tuesday as writedowns by big European banks put North American currencies back in vogue ahead of key data due later this week.
Canadian bond prices ended flat across the curve as plans by financial companies to raise capital, viewed as a possible sign that the worst of the credit crisis may be over, sapped appetite for more secure assets like government debt.
The Canadian dollar closed at US$1.0217 to the U.S. dollar, or 97.88 U.S. cents, up from C$1.0265 to the U.S. dollar, or 97.42 U.S. cents, at Monday's close.
It was a sudden turnaround for the Canadian dollar, which closed the previous session at its lowest level in more than two months because of weaker oil prices and nagging concerns about a weak U.S. economy.
But news that Swiss bank UBS UBSN.VX and Deutsche Bank took a combined $23 billion hit on their risky assets supported the idea that the credit market problems are global and sparked buying of North American currencies.
"I think it's been more of a U.S.-dollar-based move as being the primary catalyst," said George Davis, chief technical strategist at RBC Capital Markets.
"And I think in a secondary fashion we've seen the equity markets do quite well today ... and I think that has allowed levels of risk aversion to decrease and that's generally a positive for the Canadian dollar as well."
North American equity markets rallied, led by a 391-point gain on the Dow Jones industrial average .DJI, after Lehman Brothers Holdings Inc's LEH.N decision to bolster its balance sheet calmed worries about the financial sector's stability. Continued...