Canadian dollar nears four-week high

Wed Jan 30, 2008 9:35am EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar neared a four-week high versus the U.S. dollar on Wednesday due to a more stable equity market backdrop and negative sentiment towards the greenback ahead of the U.S. Federal Open Market Committee interest rate decision.

Domestic bond prices, with no Canadian economic data to consider, followed the bigger U.S. Treasury market lower after U.S. data showed the private sector added about three times more jobs than expected.

At 9:10 a.m., the Canadian dollar was at US$1.0065, valuing a U.S. dollar at 99.35 Canadian cents, up from US$1.0005, or 99.95 Canadian cents, at Tuesday's North American session close.

Oil prices were sitting near a two-week high and offered some support to the commodity-linked domestic currency, but calmer equity markets overnight after a string of wild moves, played a bigger role.

The Canadian dollar's performance in recent session has been closely linked to equity markets, which currency traders have been using as a guide for the global economic outlook.

"It's a combination of people generally feeling more negative on the U.S. dollar and the fact that we are again seeing some stability in equity markets," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.

"The violent swings of last week seem to be left behind for the time being at least which is a positive factor for the Canadian dollar."

Further moves in the Canadian dollar on Wednesday will likely be capped until after the U.S. Federal Reserve interest rate decision. The Fed is expected to cut its key lending rate by half-a-percentage point to 3 percent in a bid to bolster the U.S. economy.   Continued...