Canadian dollar rises above US$ as oil prices rise

Fri May 16, 2008 9:17am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar moved above the U.S. dollar on Friday and was on pace for a second straight weekly gain as the commodity-linked currency drew support from higher oil prices.

Domestic bond prices, with no key Canadian economic data to consider, were lower across the curve following a surprisingly strong piece of U.S. housing data.

At 8:55 a.m. (1255 GMT), the Canadian currency was at US$1.0014, valuing a U.S. dollar at 99.86 Canadian cents, up from C$1.0000 to the U.S. dollar, at Thursday's close.

Earlier, the Canadian dollar rose to US$1.0049, valuing a U.S. dollar at 99.51 Canadian cents, its highest level since March 19. The domestic currency is up about 0.7 percent this week after a gain of 1.4 percent last week.

Trade could be light on Friday, and lend to exaggerated moves, since Canadian markets will be closed on Monday for a public holiday.

Part of the Canadian dollar's strength was due to a weaker greenback, which has fallen as weak U.S. economic data released earlier this week cast doubt on expectations that the Federal Reserve would not cut interest rates further.

But the main factor was lofty oil prices, which bounced back above $125 a barrel after easing from a record near $127 earlier this week.

Canada is a major oil producer and exporter and its currency often follows prices for the commodity, a trend that has started to regain momentum in recent weeks.   Continued...