March 26, 2012 / 8:44 PM / in 6 years

Canadian dollar climbs as quantitative easing hopes hurt U.S. dollar

TORONTO (Reuters) - The Canadian dollar climbed against the U.S. currency on Monday after remarks from U.S. Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates will stay low, which helped riskier assets and hurt the greenback.

Canadian currency in the form of twenty dollar bills are displayed in this posed photograph in Toronto, October 22, 2008. REUTERS/Mark Blinch

Bernanke’s warning that the U.S. economy needs to grow more quickly to get the unemployment rate down underscored views easy monetary policy would remain in place for some time and fanned expectations for more quantitative easing.

“The market certainly has latched on to that view with respect to a weaker U.S. dollar and Canada stands to benefit, as well as what we’ve seen in commodities, more notably in precious metals as opposed to the price of oil,” said David Tulk, chief Canada macro strategist at TD Securities.

“It’s where you look for any expectation that quantitative easing is still on the table,” Tulk added, noting commodities were up in general.

Gold notched its biggest one-day gain in a month as renewed hopes for further U.S. monetary easing fueled bullion buying as a hedge against long-term inflation and economic uncertainty. <GOL/>

Disappointing U.S. home sales data on Monday reinforced the pessimistic outlook, with contracts to purchase previously owned U.S. homes unexpectedly falling in February.

The Canadian dollar ended the North American session at C$0.9912 versus its U.S. counterpart, or $1.0089, up from Friday’s North American close at C$0.9987 against the U.S. currency, or $1.0013.

Tulk said markets will look to Thursday’s Canadian federal budget and Friday’s January GDP data for further direction.

Canadian bond prices edged down across the curve, tracking U.S. Treasuries lower as demand for safe-haven government debt eased. Canada’s two-year bond slipped 2 Canadian cents to yield 1.250 percent. The 10-year bond lost 10 Canadian cents to yield 2.191 percent.

Editing by Chizu Nomiyama

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