Canadian dollar stages rebound to close higher

Thu Jun 5, 2008 5:28pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar finished a touch higher against the U.S. dollar on Thursday after rallying sharply from a 1-month low as a weaker greenback sent the price of oil higher and gave a lift to the commodity-linked currency.

Domestic bond prices were knocked lower across the curve as investors unloaded the secure assets in favor of equities after some upbeat economic data.

The Canadian dollar closed at C$1.0178 to the U.S. dollar, or 98.25 U.S. cents, up from C$1.0183 to the U.S. dollar, or 98.20 U.S. cents, at Wednesday's close.

Comments from European Central Bank President Jean-Claude Trichet that suggested euro-zone interest rates could rise as early as next month rattled the U.S. dollar and sent oil prices higher, which ultimately supported the domestic currency since Canada is a major oil exporter.

"What's holding the currency in at the moment is the rise in the price of crude oil coming on the back of U.S. dollar weakness," said Jack Spitz, managing director of foreign exchange at National Bank of Canada.

"So that cause and effect of a high price in energy is giving the Canadian dollar a slight boost today and reversing the trend to buy (U.S.) dollar Canada for the moment."

The rally in the Canadian dollar came after it had dropped to C$1.0221 to the U.S. dollar, or 97.84 U.S. cents, earlier in the session, which marked its lowest level since May 2 and put an end to a four-day losing streak.

That losing skid was triggered last week when domestic data showed the economy unexpectedly shrank in the first quarter. It picked up steam this week as oil prices eased and comments from Federal Reserve Chairman Ben Bernanke supported the greenback.   Continued...