CANADA FX DEBT-C$ strengthens as oil rises above $50

Tue Jan 6, 2009 10:30am EST
 
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*Canadian dollar at highest level since November

*Bond prices lower as stock markets rally

By Jennifer Kwan

TORONTO, Jan 6 (Reuters) - The Canadian dollar edged higher against the U.S. currency on Tuesday morning as oil rose above $50 a barrel on supply concerns resulting from the Israel-Gaza war and a dispute between Russia and Ukraine over natural gas.

Bonds were lower across the curve as expectations of new debt supply dulled the attraction of government bonds and investors continued to flock to equities, with Toronto's main stock index .GSPTSE led higher by its heavily weighted energy sector.

At 9:50 a.m. (1450 GMT), the Canadian dollar was at C$1.1804 to the U.S. dollar, or 84.72 U.S. cents, up from Monday's close at C$1.1900 to the U.S. dollar, or 84.03 U.S. cents.

The currency got support from oil CLc1, a major Canadian export, which rose above $50 a barrel as Israel's ground and air assault on Gaza heightened Middle East tensions and a dispute over natural gas between Russia and Ukraine fanned supply fears. [ID:nSIN367919]

"The biggest factor is the oil play and commodity prices generally," said Craig Wright, chief economist at Royal Bank of Canada.

"We may be seeing a bit of revision to some of the gloom out there in terms of the outlook for global growth and with that commodity prices going forward, but I think what we're seeing in the near term is more of an oil price play than anything else."   Continued...