Canadian dollar back above US$ parity

Tue Jan 29, 2008 6:00pm EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar shot back above par with the U.S. dollar on Tuesday, supported by firmer commodity prices, expectations of an increasingly favorable U.S.-Canada interest rate spread, and calmer equities markets.

Canadian bond prices fell as investors positioned themselves ahead of Wednesday's U.S. Federal Open Market Committee interest rate decision.

The Canadian currency closed the North American session at US$1.0005, valuing a U.S. dollar at 99.95 Canadian cents, up from C$1.0044 to the U.S. dollar, or 99.56 U.S. cents, at Monday's close.

Rising oil prices in the overnight session helped float the commodity-influenced Canadian unit above par.

That triggered some technical buying, which pushed it up to US$1.0055, valuing a U.S. dollar at 99.45 Canadian cents, the Canadian currency's highest level since Jan 4.

The Canadian dollar has most likely settled into a holding pattern ahead of the Fed interest rate decision on Wednesday, said Matthew Strauss, senior currency strategist at RBC Capital Markets.

The Fed is widely expected to cut its key lending rate by half-a-percentage point, bringing the fed funds rate to 3 percent as it tries to bolster the U.S. economy.

The Bank of Canada's key lending rate is at 4 percent.   Continued...