Dollar closes higher, but shy of parity

Wed Apr 16, 2008 4:57pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar shot higher against a weaker U.S. dollar on Wednesday and even came close to hitting parity for the first time in nearly a month, amid lofty commodity prices and rallying equity markets.

Domestic bond prices fell as the latest piece of Canadian data beat estimates while corporate earnings out of the United States comforted investors, who decided to unload secure assets like government debt in favor of stocks.

The Canadian dollar closed at C$1.0014 to the U.S. dollar, or 99.86 U.S. cents, up from C$1.0191 to the U.S. dollar, or 98.13 U.S. cents, at Tuesday's close.

By early afternoon, the Canadian dollar reached 99.98 U.S. cents but failed in its bid to top parity for the first time since March 19. The currency still recorded its biggest percent gain since February 25.

The Canadian dollar started making its move higher during the overnight session as the greenback stumbled on concerns over U.S. bank earnings.

Then the commodity-linked Canadian currency got a boost from a rise in oil prices to a new high above $115 a barrel while North American equity markets rallied sharply, including a 1.8 percent gain by the Toronto Stock Exchange.

It was a change from recent weeks when the Canadian dollar rose or fell alongside the U.S. dollar as investors adopted a buy North America or sell North America sentiment.

"People were bearish U.S. dollar but not bearish on North America so we did get a little bit of an offset," said David Watt, senior currency strategist at RBC Capital Markets.   Continued...