Canadian dollar gets lift from commodity prices

Thu Dec 27, 2007 4:50pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar rose on Thursday but closed just shy of a five-week high due largely to a rise in commodity prices after news that Pakistani opposition leader Benazir Bhutto had been assassinated.

Domestic bond prices, with no Canadian data to digest until next week, finished mixed despite rising earlier in the session alongside the bigger U.S. market.

The Canadian dollar closed at US$1.0183, valuing each U.S. dollar at 98.20 Canadian cents, up from US$1.0152, or 98.50 Canadian cents, from Monday's official close given by the Bank of Canada ahead of the holidays.

But the move in the Canadian dollar did not garner too much attention given the thin market conditions, which often lead to exaggerated price moves.

News of Bhutto's death rattled markets and boosted gold prices to a one-month high and helped send oil prices up more than $1 to over $97 a barrel. The prices later eased from their intraday peaks, but added support to the Canadian currency since Canada is a major producer and exporter of both commodities.

"It raised concerns about potential political instability spreading to the Middle East and concern about supply," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "So that's contributing to the strengthening in oil prices, which in turn is offering support for the Canadian dollar."

Also helping to support the currency was a drop in the greenback, which fell after U.S. economic data showed weak durable goods orders in November as well as an unexpected drop in jobless claims last week.

Thursday's rise helped to extend the Canadian dollar's latest rally, which has seen the currency climb about 4 percent in the past two weeks.   Continued...