Canadian dollar up 1.5 percent as greenback slides

Fri Sep 12, 2008 5:04pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar rose 1.5 percent against a slumping greenback on Friday as concerns about the health of the U.S. economy revived expectations of another U.S. interest rate cut.

Canadian bond prices fell as rallying Canadian stocks eroded the recent safe haven bid for government debt.

The Canadian dollar closed at C$1.0611 to the U.S. dollar, or 94.24 U.S. cents, up from C$1.0765 to the U.S. dollar, or 92.89 U.S. cents, at Thursday's close.

During the session, the Canadian dollar rose as high as C$1.0587 to the U.S. dollar, or 94.46 U.S. cents.

For the week, the currency ended 0.2 percent higher, despite falling to a 13-month low on Thursday, when the U.S. dollar was well bid.

"A lot of the trends that we've seen building up over the last few days have just gone into compete reversal," said Shaun Osborne, chief currency strategist at TD Securities.

Investors stepped back from the greenback rally, in part due to nagging concerns about the health of the U.S. financial sector. Struggling U.S. investment bank Lehman Brothers LEH.N was at the center of market worries, as investors questioned whether it would be able to find a buyer, given the U.S. government's reluctance to provide financial support.

That made some market players rethink the likelihood of the U.S. Federal Reserve cutting its key lending rate when it meets next week, Osborne said.   Continued...