Loonie Hits 3-year High

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Canada’s dollar hit its highest in three years, spurred by cautious optimism on the U.S. economy from the U.S. Federal Reserve and buoyed by a firm oil price and a positive outlook for global equity markets.

The currency jumped as high as C$0.9816 to the U.S. dollar, or $1.0187, its highest since February 2008. At 8:15 a.m. (1315 GMT), the Canadian dollar was at C$0.9828 to the U.S. dollar, or $1.0175, surpassing the 2011 high reached earlier this month at C$0.9832 to the U.S. dollar, or $1.0171.

It was also firmer than Wednesday’s North American session close at C$0.9849 to the U.S. dollar, or $1.0153.

“Although we’re at new (dollar/Canada) lows, I’m not sure it’s sustainable or if it’s going to extend that much,” said Shaun Osborne, chief currency strategist at TD Securities, but noted a push beyond C$0.98 could open the way to further Canadian dollar strength. “There’s really not that much in terms of technical resistance below these levels.”

He said a sustained rally may be helped by significantly higher oil prices, or a renewed widening out in Canada/US short-term rate spreads. But he also cautioned that a stronger Canadian dollar will be noticed by the Bank of Canada.

The Canadian central bank stressed in its January policy-setting that the high-flying Canadian dollar was hampering recovery in the export sector, the backbone of the Canadian economy. Canadian bond prices were flat to higher across the curve, taking a cue from U.S. Treasuries.

The two-year Canadian government bond was up 1 Canadian cent to yield 1.938 percent, while the 10-year bond rose 8 Canadian cents to yield 3.493 percent.

Peter J. Thompson/National Post

© Thomson Reuters February 17, 2011 – 8:26 am

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