Canadian dollar soars on equities, commodities

Thu Jan 24, 2008 6:47pm EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar vaulted well over 1-1/2 cents higher against the U.S. dollar on Thursday, as equities markets rallied, sweetening the outlook for global growth and the commodities that Canada produces.

Canadian bond prices fell across the curve on the equities rally.

The Canadian unit ended the North American session at C$1.0061 to the U.S. dollar, or 99.39 U.S. cents, up from C$1.0236 to the U.S. dollar, or 97.69 U.S. cents, at Wednesday's close.

Including moves after the official market close, it was the biggest single-day decline for the U.S. dollar against its Canadian counterpart since at least 1982, according to EcoWin. The Canadian dollar rose as high as C$1.0015 to the U.S. dollar, or 99.85 U.S. cents, by 4:40 p.m. (2140 GMT).

The correlation between equity market performance and foreign exchange movements has been unusually high lately, and the Canadian dollar was the beneficiary of Thursday's equities rally in Toronto, said Gareth Sylvester, senior currency strategist at HIFX Plc in San Francisco.

The Toronto Stock Exchange's key index ended the day up nearly 2 percent as commodities rebounded on the back of a tentative agreement by U.S. lawmakers on a $150 billion economic stimulus package.

U.S. crude oil CLc1 rose more than 2 percent to over $89 dollars a barrel on the news.

"Right now, equity markets are the best barometer for expectations of global growth and they are very sensitive to shifts in confidence and expectations, and that's essentially why traders are taking their cues from equity markets when determining trades in the FX arena," Sylvester said.   Continued...