Dollar closes at highest level in nearly two months

Tue Feb 26, 2008 5:24pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar rose versus the U.S. dollar on Tuesday and closed at its highest level in nearly two months, backed by another surge in oil prices, with the Canadian government's 2008-09 budget having little impact.

Canadian bond prices rebounded from losses in the previous session and ended higher across the curve ahead of U.S. Federal Reserve Chairman Ben Bernanke's congressional testimony on Wednesday and Thursday.

The Canadian dollar closed at US$1.0179, valuing a U.S. dollar at 98.24 Canadian cents, up from US$1.0048, valuing a U.S. dollar at 99.52 Canadian cents, at Monday's close.

Fresh off a third straight losing week, the Canadian dollar is up 3 percent versus the greenback this week, helped by lofty commodity prices and rising equity markets.

The greenback fell to a record low versus a basket of currencies on Tuesday amid worries over the health of the U.S. economy and the prospect of more Federal Reserve interest rate cuts.

"We've seen fundamentals starting to support the Canadian dollar," said Matthew Strauss, senior currency strategist at RBC Capital Markets. "That explains partly why we are seeing a strong performance from the Canadian dollar ... especially against broadly-based weaker U.S. dollar."

The Canadian currency got off to a rough start this year, falling 4.5 percent in the first three weeks, before aggressive U.S. interest rate cuts helped push it up again. It has since made up all the losses and is up 0.9 percent in 2008.

The release of the Conservative government's budget after the official market close did not spark a move in the Canadian dollar, which spent the session in a range of US$1.0089, or 99.11 Canadian cents, to US$1.0219, or 97.85 Canadian cents.   Continued...