SF: Canada's Dollar Is Near 5-Month High on Commodity Price Gains
Oct. 7 (Bloomberg) -- Canada's dollar traded near a five- month high versus its U.S. counterpart as crude oil and other commodity prices increased, making investments linked to growth more attractive.
The Canadian currency has strengthened 5.1 percent since hitting a six-week low Aug. 31 amid speculation that other central banks will continue to ease monetary policy as the Bank of Canada remains on hold. Canada draws about half its export revenue from commodities including oil, copper, lumber and wheat.
"The loonie strength is largely a weak U.S. dollar story which stems from the likelihood of more quantitative easing," said Sal Guatieri, a senior economist at Bank of Montreal in Toronto. "The Bank of Canada's tightening cycle seem to be sidelined, but the prospect of more easing here is very low compared to the U.S. And a weak dollar pushes up commodity prices, which supports the Canadian dollar as well."
Canada's dollar traded at C$1.0112 per U.S. dollar at 8:21 a.m. in New York, compared with C$1.0111 yesterday. It touched C$1.0078, near the strongest level since April 30. One Canadian dollar buys 98.91 U.S. cents.
Crude for November delivery rose as much as 0.9 percent to $83.95 a barrel.
The loonie, as the currency is nicknamed, reached parity with the greenback April 6 for the first time since July 2008 based on the prospect of higher interest rates and stronger economic growth than in the U.S.
The Bank of Canada raised its benchmark rate to 1 percent on Sept. 8, its third straight move. Last week, Governor Mark Carney said further increases "would need to be carefully considered" given risks of a renewed U.S. slowdown and cooling consumer spending in Canada.
