Canada dollar rises closer to parity after BoC survey

Mon Apr 12, 2010 4:54pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar rose against the U.S. dollar on Monday and came within spitting distance of parity after Bank of Canada surveys pointed to an upbeat business mood, enhancing the market notion that the central bank would raise interest rates at midyear.

The currency rose as high as C$1.0011 to the U.S. dollar, or 99.89 U.S. cents, after the Bank of Canada reports were released.

"The Canada specific portion of it really comes down to the appreciation that we saw ... with the business outlook survey in Canada reflecting reasonably well on the Canadian economy and the loonie, and allowing it to spread its wings a little bit," said Eric Lascelles, chief economics and rates strategist at TD Securities.

The Canadian dollar finished at C$1.0033 to the U.S. dollar, or 99.67 U.S. cents, slightly higher than Friday's close of C$1.0040 to the U.S. dollar, or 99.60 U.S. cents.

The central bank has kept its key overnight interest rate at a historic low of 0.25 percent since April 2009, pledging to maintain that level until the end of June, unless inflation threatens to spiral out of control.

The bank's surveys indicate that the economic recovery is on track, said Matthew Strauss, senior currency strategist at RBC Capital Markets, and support "the notion the Bank of Canada will have to move on interest rates once the conditional commitment expires".

The release of the surveys coincided with comments by Finance Minister Jim Flaherty, who repeated that the recent rise by the currency has been "relatively orderly".

Flaherty's comments soothed any potential market jitters about the currency's rise, Strauss said.   Continued...