Canadian dollar hits 2 1/2 year high in last session of 2010

Fri Dec 31, 2010 2:23pm EST
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By Ka Yan Ng

TORONTO (Reuters) - Canada's dollar hit its highest in more than 30 months on Friday, boosted by rallying commodities, to close out the year above parity with the U.S. currency on scant New Year's Eve trading volumes.

The Canadian dollar reached as high as C$0.9925 to the U.S. dollar, or $1.0076, a peak last touched in May 2008, after briefly poking through a technical support level.

Analysts noted the move to break C$0.9931 to the U.S. dollar came under very thin trading conditions on the last day of a year that included the Bank of Canada's first rate hikes following the financial crisis, euro zone debt troubles, rising commodity prices, and the U.S. Federal Reserve's stimulus plans.

The gains were also made as the U.S. dollar fell broadly as investors closed their books on 2010.

The Canadian dollar's strength also coincided with a reversal in the price of oil, which surged back above $91 a barrel as the weaker U.S. dollar and technical support stopped a bout of year-end profit taking.

Other commodity-linked currencies, such as the Australian dollar -- which hit a 28-year high against the greenback -- remained in favor on expectations that Asia will extend the global recovery in 2011.

"Canada is kind of in the middle of the pack ... but you're getting that sense that, after a long year and some very shallow trading, there's this sentiment of a weaker U.S. dollar heading into year-end," said David Tulk, senior macro strategist at TD Securities.

The Canadian dollar finished at C$0.9946 to the U.S. dollar, or $1.0054, up from Thursday's close at par, which was the loonie's first finish at the one-for-one level since November 10.   Continued...