Canadian dollar follows oil prices to higher close

Wed Feb 20, 2008 4:46pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar rose against the U.S. dollar on Wednesday as record high oil prices helped it bounce off a one-month low while dovish minutes from a U.S. Federal Reserve meeting added to the rise.

Domestic bond prices slipped on the short end of the curve as investors felt comfortable moving into riskier investments like equities.

The Canadian dollar closed at C$1.0130 to the U.S. dollar, or 98.72 U.S. cents, up from C$1.0171 to the U.S. dollar, or 98.32 U.S. cents, at Tuesday's close.

Lofty oil prices, a weaker greenback and Fed minutes that warned of more risks to U.S. economic growth joined forces to help lift the Canadian dollar from a session low of C$1.0199 to the U.S. dollar, or 98.05 U.S. cents.

Canada is a major energy producer and exporter and the currency often follows the direction of oil prices, which rose on Wednesday to a record high of $101.32 a barrel.

"The U.S. dollar sold off across the board," said David Powell, currency analyst at IDEAglobal in New York. "Plus the rise in oil has helped (the Canadian dollar) but it's really something being seen across the market."

Powell also said the minutes from the Fed's most recent policy-setting meeting, which lowered its growth forecast for 2008, added momentum to the greenback's slide.

The late-day rally in the Canadian dollar fell short of sending the currency through its overnight high of C$1.0106, or 98.95 U.S. cents, when overseas investors reacted to the rise in oil prices on Tuesday.   Continued...

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