TORONTO (Reuters) - Canada's dollar zoomed to a one-year high against the U.S. currency on Thursday as commodity and equity prices rose on upbeat economic data that lifted optimism for recovery and whetted the market's appetite for risk.
The currency raced as high as C$1.0506 to the U.S. dollar, or 95.18 U.S. cents, its highest level since September 30, 2008. The underlying catalyst on Thursday was Australian employment data that rose past expectations.
"That sentiment was carried through to North America," said Brendan McGrath, senior trader at Custom House.
"It's positive sentiment. Risk is back in the market again today. As a result, commodities are up, equities are up and you can bet when that happens the Canadian dollar will be (up) too."
That news followed the Reserve Bank of Australia's interest-rate increase earlier this week, which made it the first G20 central bank to raise rates following the wave of rate cuts that accompanied the onset of the recession. The market took this as a sign of improved economic conditions, and the move sparked speculation about which central bank would be next in line.
"We obviously don't think that the Bank of Canada is moving on rates any time soon but it does show that central banks are starting to get back into that tightening mode and reaffirms the improved risk appetite," said Shane Enright, executive director, foreign exchange sales at CIBC World Markets.
Helping drive Canada's currency higher was a rise in oil prices above $71 a barrel and soaring gold prices, which hit a record high for a third successive session, climbing above $1,060 an ounce.
The Canadian dollar finished at C$1.0522 to the U.S. dollar, or 95.04 U.S. cents, up from C$1.0624 to the U.S. dollar, or 94.13 U.S. cents, at Wednesday's close.
The upbeat tone was supported by U.S. jobs data that suggested stabilization in the labor market and helped to boost North American stock markets.
Markets are awaiting Friday's September jobs data, with the report expected to show the Canadian economy created 5,000 jobs in September.
Experts said the report could be a major mover for the Canadian currency. If the numbers prove to be better than expected, the Canadian dollar could continue its ascent and pierce the C$1.0500 level.
Canadian bond prices were lower across the curve alongside the bigger U.S. Treasury market, which turned negative after a poorly received 30-year bond auction, stoking concerns about waning appetite for big government issues.
The market will shift its focus to Friday's jobs numbers, though activity is expected to muted due to the long weekend, said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment. Monday is Thanksgiving Day in Canada.
The two-year bond fell 17 Canadian cents to C$99.49 to yield 1.496 percent, while the 10-year bond sank 70 Canadian cents to C$103.15 to yield 3.364 percent.
The Canadian market notched a mixed performance against U.S. Treasuries, with the 10-year Canadian yield about 11 basis points above the U.S., up from around nine basis points on Wednesday. The 30-year Canadian yield was about 19 basis points below the U.S., against 16.3 basis points below on Wednesday.
Reporting by Jennifer Kwan; editing by Peter Galloway