Canadian dollar ekes out gain on oil surge

Wed Jul 30, 2008 5:07pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar eked out a gain against the U.S. dollar on Wednesday, ending a six-session slide, as higher oil prices lent the commodity-based currency some support.

Canadian bond prices were mostly lower as solid North American stock market performances cut into the safe-haven attraction of government debt.

The Canadian dollar closed at C$1.0228 to the U.S. dollar, or 97.77 U.S. cents, up from C$1.0238 to the U.S. dollar, or 97.68 U.S. cents, at Tuesday's close.

The currency had fallen to low of C$1.0271 to the U.S. dollar during the session after the greenback strengthened on the back of some higher than expected private-sector jobs data.

But the Canadian dollar was given a boost after the price of U.S. crude oil jumped more than $4 a barrel on figures that showed a surprise drawdown in U.S. gasoline stocks.

Canada is the biggest supplier of oil to the United States and much of the Canadian dollar's 60 percent run-up between 2002 and late 2007 was linked to higher oil prices.

Moves in the Canadian dollar that are driven by fluctuations in the price of oil are still common, but the longer-term influence of oil has waned considerably since oil prices skyrocketed in recent months.

"Part of that has to do with the notion that the latest price action in the oil market is at least partly, if not largely, driven by speculation, and therefore not reflective of an underlying sustainable trend," said Matthew Strauss, senior currency strategist at BC Capital Markets.   Continued...