Canada dollar closes at six-week high on soft U.S. dollar

Tue Jul 15, 2008 5:52pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar closed at a six-week high against the U.S. dollar on Tuesday after briefly popping above parity with the greenback in overseas trade before slipping back on economic concerns emanating from the United States.

Canadian bond prices closed mostly higher, taking their cue from falling stock markets and largely shrugging off the Bank of Canada's decision to hold interest rates steady, which had been expected.

The Canadian dollar closed at C$1.0023, or 99.77 U.S. cents, up from C$1.0052 to the U.S. dollar, or 99.48 U.S. cents, at Monday's close.

During the overseas session, the currency rose as high as US$1.0022, valuing a U.S. dollar at 99.78 Canadian cents, its strongest level since June 3.

The push higher was mainly due to U.S. dollar weakness. The greenback lost ground against a number of currencies as investors second-guessed the U.S. government's plan to boost confidence in the financial system.

U.S. Federal Reserve Chairman Ben Bernanke said in a speech on Tuesday that restoring financial market stability was a top priority for the central banks, adding that financial markets and institutions remain under considerable stress.

Over the weekend the U.S. government introduced a package to shore up Freddie Mac and Fannie Mae, the two largest U.S. providers of mortgage funding.

The Canadian currency barely reacted to the Bank of Canada's announcement that it would leave its key rate steady at 3.00 percent. The bank pointed to risks coming from the soft U.S. economy, but also said inflation could rise above 4 percent for the first time since 2003.   Continued...

<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best</p>