Canada Afternoon: C$ Ends Up, Hits More New Yearly Highs

TORONTO (Dow Jones)--The Canadian dollar ended at more fresh 2009 highs Thursday, as a permissive global risk environment and soaring gold, oil, and other commodity prices enabled the currency to reach its strongest levels in over a year against the fading U.S. dollar.

The U.S. dollar was trading at C$1.0510 at 3:35 p.m. EDT (1935 GMT), from C$1.0558 at 8:00 a.m. EDT (1200 GMT) and C$1.0622 late Wednesday.

The Canadian dollar and other currencies reversed from modest early weakness on Thursday, as risk appetites picked up throughout the day and lifted equity markets and commodity prices.

The turnabout was informed by several factors, including unexpectedly strong Australian employment figures, some positive corporate earnings reports, and mildly positive U.S. jobless claims data. Combined, these all served to reassert faith in global economic recovery.

"There's also a preference to beat the U.S. dollar while it's down, so everything was again lined up for Canadian dollar strength today," said senior currency strategist David Watt of RBC Capital Markets in Toronto.

Watt added that the Canadian dollar's most recent move to new yearly highs in an environment of pervasive U.S. dollar weakness is already feeding expectations for a retest of parity with the U.S. unit in the near-term.

Watt and most currency watchers argue that the Canadian currency probably won't be able to sustainably trade past parity with the U.S. dollar until sometime in 2010, though sheer market dynamics could force an earlier test of that level, particularly if coming Canadian data surprises to the upside.

Canada will release its September employment report on Friday in conjunction with August merchandise trade figures and the Bank of Canada's latest quarterly business outlook survey.

Any of these, particularly the jobs data, could serve as a catalyst for an extension of Canadian dollar gains as long as general risk appetites hold up.

"The market is very hyped up after the strong Australian jobs numbers, not that there is any tight link between Canadian and Australian employment reports," Watt said. "But you get strong numbers like that, and people are looking to the Canadian jobs report and starting to froth at the mouth."

These are the exchange rates at 3:35 p.m. EDT (1935 GMT), 8:00 a.m. EDT (1200 GMT), and late Wednesday.

   USD/CAD     1.0510      1.0558     1.0622 
   EUR/CAD     1.5551      1.5581     1.5603 
   CAD/JPY      84.18       83.65      83.42 

-By Paul Evans, Dow Jones Newswires; 416-306-2022; paulr.evans@dowjones.com

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(END) Dow Jones Newswires

October 08, 2009 15:37 ET (19:37 GMT)


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