Loonie rises as investors flee greenback

Thu Sep 18, 2008 10:02am EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar gained 0.6 percent on the U.S. dollar on Thursday as investors sold greenbacks due to concern about the health of the U.S. financial and money markets.

Canadian bond prices unwound some of their recent gains after a coordinated effort by several central banks to increase liquidity to cash-starved markets.

At 9:24 a.m. EDT, the Canadian dollar was at C$1.0645 to the U.S. dollar, or 94.13 U.S. cents, up from C$1.0688 to the U.S. dollar, or 93.56 U.S. cents, at Wednesday's close.

The currency hit its strongest point of C$1.0575, or 94.56 U.S. cents, in the overnight session as the U.S. dollar sold off on market fears about the U.S. financial sector.

As the U.S. dollar sold off, a lot of people who had made bets in favor of the greenback strengthening, scrambled to get out, said George Davis, chief technical strategist at RBC Capital Markets.

"It seemed that once we broke below the C$1.0670 level, a lot of people started throwing in the towel and getting out of their long U.S. dollar positions and that just exacerbated the selloff," he said.

Commodities, which make up about half of Canada's exports, were also contributing to the stronger Canadian dollar.   Continued...