By Chris Fournier Dec. 15 (Bloomberg) -- Canada’s currency appreciated as its U.S. counterpart declined on speculation the Federal Reserve will cut borrowing costs by a half-percentage point tomorrow, making higher-yielding currencies more attractive. “The U.S. dollar is weaker today against many other currencies due to expectations that the Fed will cut rates,” said Kate Warne, a market strategist with Edward Jones & Co. in St. Louis. “Canada’s dollar was also helped a bit by the rise in gold prices.” The Canadian dollar, known as the loonie because of the aquatic bird on the one-dollar coin, strengthened 1.1 percent to C$1.2339 per U.S. dollar at 4:52 p.m. in Toronto, from C$1.2339 on Dec. 12. One Canadian dollar buys 81.04 U.S. cents. Canada’s currency has declined 19 percent this year as a global recession reduces demand for commodities, which generate about half of the country’s export revenue. The Bank of Canada’s index of 23 commodity prices fell to the lowest since July 2005 last week. The U.S. dollar dropped against all of the 16 most actively traded currencies except the South African rand. “The U.S. dollar is losing steam,” CIBC World Markets’ Avery Shenfeld and Shane Enright in Toronto and Adam Fazio in New York wrote in a note today. “Momentum has shifted in recent days. The Canadian dollar has found a footing as a result.” They predicted the currency would strengthen to C$1.22 in the first quarter. Futures on the Chicago Board of Trade showed a 70 percent chance the Fed will trim its 1 percent target rate for overnight lending between banks at its meeting tomorrow to 0.25 percent, the all-time low, compared with zero odds a month ago. Gold futures for February delivery rose $16 to $836.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $843.70, the highest for a most- active contract since Oct. 16. Silver futures for March delivery climbed 39 cents to $10.62 an ounce. Data expected this week from Canada’s government includes manufacturing shipments, wholesale sales, international securities transactions and retail sales. The yield on the two-year government bond fell three basis points, or 0.03 percentage point, to 1.45 percent in Toronto. The price of the 2.75 percent security due in December 2010 gained 6 cents to C$102.49. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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