Canada dollar adds to gains on surging commodities

Wed Feb 27, 2008 4:23pm EST
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By Frank Pingue

TORONTO (Reuters) - The suddenly red-hot Canadian dollar hit its highest level of 2008 versus the U.S. dollar on Wednesday as lofty commodity prices helped the currency build on sharp gains recorded earlier this week.

Domestic bond prices had no key Canadian data to consider but still managed to build on gains made during the previous session given widespread expectations for further interest rate cuts in the United States.

The Canadian dollar closed at US$1.0196, valuing a U.S. dollar at 98.07 Canadian cents, up from US$1.0179, valuing a U.S. dollar at 98.24 Canadian cents, at Tuesday's close.

The latest charge in the Canadian dollar, which is up 3 percent this week following three straight weekly declines, has been supported largely be a surge in commodity prices.

Oil prices hit a record high of $102.08 a barrel while gold prices neared $970 an ounce, both offering a boost to the currency given that Canada is a major producer.

The commodity backdrop helped the currency rally overnight to US$1.0247, valuing a U.S. dollar at 97.59 Canadian cents, which marked its highest level since December 28.

"Certainly the commodity-based aspect of the economy is lending support to the Canadian dollar," said Gareth Sylvester, senior currency strategist at HIFX Plc in San Francisco. "But there are also technical influences in the moves that we've seen over the last three days as well."

Sylvester said the Canadian dollar's failure to break above the US$1.0250, or 97.56 Canadian cents, a level it hit on December 28, is indicative of a technical-style move since it respected one of its previous highs.   Continued...