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Canada Afternoon: C$ Ends Up On Weak USD, Russia Reserves News

TORONTO (Dow Jones)--The Canadian dollar ended higher Wednesday, rising to its strongest levels in a week as the U.S. dollar crumbled on a global basis and Russia announced plans to begin adding Canadian dollars to its reserve currency basket.

The U.S. dollar was trading at C$1.0458 at 3:40 p.m. EST (2040 GMT), from C$1.0470 at 8:00 a.m. EST (1300 GMT), and from C$1.0592 late Tuesday.

In trading that was already quite illiquid ahead of Thursday's close of U.S. markets for the Thanksgiving Day holiday, the Canadian dollar rallied overnight alongside most widely-traded currencies on a fresh bout of U.S. dollar-selling, this one driven in part by expectations of ever-widening interest rate differentials between the U.S. and nations where economic recovery is progressing more smoothly.

Another large jump in gold prices as well as strength in other commodities also supported the Canadian dollar overnight and into early North American dealings.

The Canadian currency was further energized by news of Russia's confirmation of earlier indications that it is adding Canadian dollars to its store of foreign exchange reserves.

The Russian central bank's head of open market operations in comments to the State Duma that the central bank is undergoing "technical preparations for operations in Canadian dollars."

The Canadian dollar in response vaulted through the C$1.0500 figure, and then spent the rest of the day hovering in the mid- to high-C$1.0400s, even as the euro and other currencies extended their gains on the U.S. dollar as markets thinned out further ahead of the U.S. holiday.

While Wednesday's developments moved the Canadian dollar to the upward limits of its recent trading range, currency watchers said there may be some reluctance to push the currency much further, given frequent recent Bank of Canada expressions of discontent with rampant Canadian dollar strength.

"Any time we've gotten down to these levels or lower we've had the Bank of Canada jumping in with commentary," said Don Mikolich, executive director of foreign exchange at CIBC World Markets in Toronto. "Those influences is still there, so even if our trading range has widened a bit, I think there's this cloud overhead for the Canadian dollar in that the Bank of Canada clearly feels that a strong currency will derail the economic recovery."

These are the exchange rates at 3:40 p.m. EST (2040 GMT), 8:00 a.m. EST (1300 GMT), and late Tuesday.

 
   USD/CAD     1.0458      1.0470     1.0592 
   EUR/CAD     1.5838      1.5788     1.5851 
   CAD/JPY      83.57       83.72      83.66 

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

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(END) Dow Jones Newswires

November 25, 2009 15:44 ET (20:44 GMT)


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