Loonie rallies on risk appetite; touches 5-week high

Tue Sep 8, 2009 11:16am EDT
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By Frank Pingue

TORONTO (Reuters) - Canada's dollar rose versus the U.S. currency on Tuesday, driven by a rally in commodities and equities, but it backed off a five-week high reached earlier as traders opted to pocket some of the sharp gain.

The overnight surge in the Canadian dollar, which reached a high of C$1.0674 to the U.S. dollar, or 93.69 U.S. cents, came alongside a number of other currencies that took advantage of a greater investor appetite for riskier assets.

"A lot of these currencies were making spectacular gains and I think the market just figured it was probably a good idea to take some profit on these positions," said David Watt, senior currency strategist at RBC Capital Markets. "So again, it's just the market taking a look at the situation and taking some money off the table."

By 10:55 a.m EDT, the Canadian unit was at C$1.0722 to the U.S. dollar, or 93.27 U.S. cents, up from C$1.0867 to the U.S. dollar, or 92.02 U.S. cents, at Friday's close.

The Bank of Canada did not offer a closing level for the Canadian dollar on Monday as North American financial markets were closed for Labor Day.

The bulk of the Canadian dollar's rise came alongside a rally in prices for oil and gold, both considered key Canadian exports whose prices often influence the currency.

Oil prices climbed above $70 a barrel on a growing risk appetite, while gold prices topped $1,000 an ounce for the first time in six month.

A chunk of the currency's retreat from the overnight high followed data that showed Canadian building permits fell 11.4 percent in July, but the report was not blamed for the slight pullback as it is not considered key data.   Continued...

<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best</p>