Canadian dollar inches towards US$ parity; bonds fall

Mon Apr 5, 2010 4:37pm EDT
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By Jennifer Kwan and Claire Sibonney

TORONTO (Reuters) - The Canadian dollar edged closer to parity with the U.S. currency on Monday, rising to a 20-month high as the price of oil soared on bets the global economic recovery is on solid footing.

The currency rose as high as C$1.0010 to the U.S. dollar, or 99.90 U.S. cents, supported by oil prices that rose more than 2 percent to their highest level since October 2008 after recent data showed U.S. payrolls surged in March.

Also supporting a positive view on economic recovery was U.S. data that showed the services sector grew in March at its fastest pace in nearly four years, while pending sales contracts for existing homes rose in February.

"The whole recovery story gaining steam has helped us," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.

"The story is largely the same: the notion of the recovery taking firmer hold and the notion that commodity prices generally rising are certainly helpful for the Canadian dollar doing well."

The currency finished at C$1.0028 to the U.S. dollar, or 99.72 U.S. cents, up from Thursday's Bank of Canada close of C$1.0084 to the U.S. dollar, or 99.17 U.S. cents. Canadian markets were closed on Friday for the Easter holiday.

The Canadian currency's rally fanned speculation that it will reach parity with the greenback, perhaps as early as this week.

Camilla Sutton, a currency strategist at Scotia Capital, said "parity is imminent".   Continued...