The Canadian dollar climbed to its highest level versus the U.S. currency in nearly six months on Tuesday as demand for riskier currencies was on the rise.
This week's rebound in commodity prices, oil in particular, helped the Canadian currency hit C$1.1677 to the U.S. dollar, or 85.64 U.S. cents, its highest since November 10. Crude, a key Canadian export, neared US$55 a barrel.
The currency has recently traded in tandem with equity and commodity markets, in line with a theme of investors increasingly willing to take on more risk.
"The main thing is increased risk appetite amid signs global recession is easing," said Sal Guatieri, senior economist at BMO Capital Markets.
At 9:10 a.m. EDT, the Canadian unit was at C$1.1703 to the U.S. dollar, or 85.45 U.S. cents, up from C$1.1735 to the U.S. dollar, or 85.22 U.S. cents, at Monday's close.
With no major Canadian economic data was due on Tuesday, markets will be watching for employment data, the Ivey Purchasing Managers' Index, and housing reports later this week. U.S. employment figures are due on Friday.
A key risk this week may also be the U.S. Federal Reserve's release of the bank stress test results.
Canadian bonds were mixed with long bonds edging higher, while shorter-dated debt dipped, as investors weighed equity market appetite and supply.
Bonds have been flat to lower in recent days as equity markets rose to their best levels in nearly six months.
"Given the return of risk appetite and strong rallies in equity markets, it's actually surprising that bonds haven't weakened further," said Mr. Guatieri.
"In the background, the Fed's purchases of Treasuries are putting a ceiling on U.S. Treasury yields and that's tending to support the Canadian market as well."
The two-year Canada bond fell 7 cents to $100.42 to yield 1.044%, while the 10-year bond rose 27 cents to $105.90 to yield 3.065%.
The 30-year bond rose 10 cents to $119.60 to yield 3.852%. In the United States, the 30-year Treasury yielded 4.049%.
