Canadian dollar higher as oil prices rebound

Thu Sep 4, 2008 9:56am EDT
 
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was higher versus the U.S. dollar on Thursday as oil prices firmed after a recent retreat, but the move was capped ahead of key domestic jobs data due out on Friday.

Domestic bond prices, with no Canadian data to influence a move, were mostly higher alongside the bigger and more influential U.S. Treasury market.

At 9:45 a.m. EDT, the Canadian unit was at C$1.0591 to the U.S. dollar, or 94.42 U.S. cents, up from C$1.0610 to the U.S. dollar, or 94.25 U.S. cents, at Wednesday's close.

Another boost for the Canadian dollar was a spillover of buying from the previous session when the Bank of Canada did as expected and left its key rate steady but also gave a statement that gave no sign that it would ease any time this year.

With oil prices back above $110 a barrel after some recent weakness, the Canadian currency was also benefiting from a positive commodity backdrop since Canada is considered a key exporter of oil.

"This sort of shows that the underlying tone for the Canadian dollar is not bearish despite what we've seen with the Canadian dollar versus the U.S. dollar over the past several weeks," said David Watt, senior currency strategist at RBC Capital Markets.

"Even before the Bank of Canada yesterday there seemed to be certainly a bearish tone developing and the Bank of Canada just wiped that all away."

The Bank of Canada left its key rate at 3 percent and signaled that it was in no hurry to cut rates any time soon, even though it acknowledged that the U.S. economic outlook could worsen.   Continued...