Canadian dollar rallies above par vs greenback

Mon Feb 25, 2008 4:36pm EST
 
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar closed above parity with the U.S. dollar on Monday, for the first time in almost two weeks, as commodity prices and positive news for U.S. bond insurers boosted investor sentiment.

Domestic bond prices, with no Canadian economic data to consider, followed the bigger U.S. Treasury market to a lower close across the curve.

The Canadian dollar closed at US$1.0048, valuing a U.S. dollar at 99.80 Canadian cents, up from 98.72 U.S. cents, valuing a U.S. dollar at C$1.0130, at Friday's close.

It marked the Canadian currency's first close above par with the greenback since February 13 and follows three straight losing weeks.

Buying interest in the currency picked up momentum late in Friday's session as investors reacted positively to news about a possible bailout of U.S. bond insurer Ambac Financial Group ABK.N.

That helped spark a rally in stock markets -- which have helped dictate the Canadian dollar's direction for much of 2008 -- and carried over into the overnight session and through the North America session.

"In the overnight session that was a major catalyst for a good portion of the gains for the Canadian dollar and in North America we saw a follow-through on that theme," said George Davis, chief technical strategist at RBC Capital Markets.

"And equity markets opened higher and have traded higher throughout the day, so that's been a positive backdrop -- and the commodity backdrop is still pretty favorable."   Continued...