Red-hot Canada dollar ends higher, off 3-mth high

Thu Feb 28, 2008 4:48pm EST
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By Frank Pingue

TORONTO (Reuters) - The red-hot Canadian dollar extended its run higher against the U.S. dollar on Thursday, revisiting levels not seen since mid-November, as a backdrop of lofty commodity prices offered support.

Domestic bond prices ended higher across the curve as the latest economic data from the United States raised fears about a recession and supported the case for lower interest rates.

The Canadian dollar closed at US$1.0241, valuing a U.S. dollar at 97.65 Canadian cents, up from US$1.0196, valuing a U.S. dollar at 98.07 Canadian cents, at Wednesday's close.

After skidding for three straight weeks, the Canadian currency has turned around and surged 3.7 percent versus its U.S. counterpart this week.

It hit US$1.0298, valuing a U.S. dollar at 97.11 Canadian cents, in the first half of the North American session, which marked its highest level since November 19.

The bulk of its gains have been pegged to high commodity prices, namely a surge in oil prices to a record above $102 a barrel. Canada is a major producer and exporter of oil, as well as commodities such as gold.

Also helping compound the dollar's gains has been a weaker greenback given a run of weak data and widespread expectations for the U.S. Federal Reserve to lower interest rates.

"There seems to be real underlying strength in commodity prices and I do believe this is more than just the flip side of a weak U.S. dollar," said Doug Porter, deputy chief economist at BMO Capital Markets.   Continued...