Canadian dollar gets boost from firm commodities

Tue Jan 8, 2008 9:40am EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar rose against the U.S. dollar on Tuesday, moving off a 2-1/2 week low, as a rebound in oil and gold prices supported the commodity-linked currency.

Domestic bond prices were down ahead of a speech by a Bank of Canada official which may offer clarity on the central bank's impending monetary policy decision on January 22.

At 9:20 a.m. the Canadian unit was at 99.87 U.S. cents, valuing a U.S. dollar at C$1.0013, up from 99.44 U.S. cents, or C$1.0056, at Monday's close.

The Canadian dollar fell to 99.21 U.S. cents, or C$1.0080, on Monday, which marked its lowest level since December 19. But it managed to bounce back during the overnight session along with a rise in oil and gold prices.

"Oil has recovered about half its losses from yesterday and gold is at a new record high so that's generally giving the Canadian dollar a bit of independent support," said Adam Cole, currency strategist at RBC Capital Markets in London.

The rise in the Canadian dollar brought it closer to parity with its U.S. counterpart, and many market experts expect it to stay there through the first quarter of the year.

Bank of Canada Deputy Governor Sheryl Kennedy will give a speech in Montreal shortly after midday, but the market does not expect her to stray from recent Bank of Canada comments.

Earlier this week, Bank of Canada Governor David Dodge said in Switzerland that a slowdown in the U.S. economy in the first half of 2008 could have a worse impact on Canada's performance than was expected a few months ago.   Continued...