Canadian dollar rises to near 3-year high, backed by oil

Fri Feb 25, 2011 5:27pm EST
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar closed near three-year highs against its U.S. counterpart on Friday as risk appetite returned on the back of stronger equities and recent strength in oil prices.

The Canadian dollar closed at C$0.9787 to the U.S. dollar, or $1.0218, up from Thursday's North American finish of C$0.9832 to the U.S. dollar, or $1.0171.

During the day it rose as high as C$0.9780, or $1.0225, its loftiest level since March 2008, when it closed at C$0.9740.

The gains came as Toronto's main stock index jumped back above 14,000 in a broad relief rally led by the mining-heavy materials sector and heavyweight banks.

The market relief came as fears of economic disruption due to a surge in oil prices spurred by the Libyan crisis were soothed by news that Saudi Arabia has increased production. Canada is a major oil exporter and although crude prices were down from Thursday's 2-1/2 year highs, they were still strong on Friday and allowed the currency to break the C$0.98 barrier.

Oil prices were firmly higher on the week.

"It was risk appetite today for sure. Equity markets were up across the board -- that was the main driver," said Kam Bath, a fixed income strategist at RBC Capital Markets.

"(Oil) for sure has been underpinning it, and letting CAD hold on to its gains."   Continued...