February 20, 2008 / 9:41 PM / 11 years ago

Canadian dollar follows oil prices to higher close

 By Frank Pingue
 TORONTO, Feb 20 (Reuters) - The Canadian dollar rose
against the U.S. dollar on Wednesday as record high oil prices
helped it bounce off a one-month low while dovish minutes from
a U.S. Federal Reserve meeting added to the rise.
 Domestic bond prices slipped on the short end of the curve
as investors felt comfortable moving into riskier investments
like equities.
 The Canadian dollar closed at C$1.0130 to the U.S. dollar,
or 98.72 U.S. cents, up from C$1.0171 to the U.S. dollar, or
98.32 U.S. cents, at Tuesday's close.
 Lofty oil prices, a weaker greenback and Fed minutes that
warned of more risks to U.S. economic growth joined forces to
help lift the Canadian dollar from a session low of C$1.0199 to
the U.S. dollar, or 98.05 U.S. cents.
 Canada is a major energy producer and exporter and the
currency often follows the direction of oil prices, which rose
on Wednesday to a record high of $101.32 a barrel.
 "The U.S. dollar sold off across the board," said David
Powell, currency analyst at IDEAglobal in New York. "Plus the
rise in oil has helped (the Canadian dollar) but it's really
something being seen across the market."
 Powell also said the minutes from the Fed's most recent
policy-setting meeting, which lowered its growth forecast for
2008, added momentum to the greenback's slide.
 The late-day rally in the Canadian dollar fell short of
sending the currency through its overnight high of C$1.0106, or
98.95 U.S. cents, when overseas investors reacted to the rise
in oil prices on Tuesday.
 Economic data released during the session had little impact
on the currency as investors awaited domestic December retail
sales data, due on Friday, since it will offer some insight as
to how resilient consumer demand is going to be in 2008.
 Canada's composite leading indicator unexpectedly climbed
0.2 percent in January, while another report showed foreigners
returned to Canada's stock market in December after four months
of decline.
 With no key domestic data to consider, Canadian bond prices
largely followed the move in the bigger U.S. Treasury market,
slipping on the short end of the curve and eking out a gain on
the long end.
 The two-year bond fell 8 Canadian cents to C$101.88 to
yield 3.151 percent. The 10-year bond rose 2 Canadian cents to
C$100.55 to yield 3.928 percent.
 The yield spread between the two- and 10-year bond was 77.7
basis points, down from 81.6 basis points at the previous
 The 30-year bond gained 32 Canadian cents to C$112.32 to
yield 4.259 percent. In the United States, the 30-year treasury
yielded 4.605 percent.
 The three-month when-issued T-bill yielded 3.25 percent,
unchanged from the previous close.
 (Editing by Rob Wilson)

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