Canada Afternoon: C$ Hits More 2009 Highs As Oil Rallies

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Wednesday, May 6, 2009
Canada Afternoon: C$ Hits More 2009 Highs As Oil Rallies
TORONTO (Dow Jones)--The Canadian dollar established more new 2009 highs Wednesday, as another surge in oil prices added to the ongoing willingness of investors to take on more risk and move back into pro-growth, pro-cyclical currencies.

The U.S. dollar was trading at C$1.1675 at 3:35 p.m. EDT (1935 GMT), from C$1.1809 at 8:00 a.m. EDT (1200 GMT) and C$1.1763 late Tuesday.

Along with other commodity-linked units like the Australian dollar, the Canadian dollar has benefitted enormously in recent days from a further easing of risk aversion in global markets, seen also in equity and commodity price gains.

Wednesday, those forces drew further nourishment from news that the U.S. April employment estimate from private payrolls firm Automatic Data Processing suggested a smaller-than-forecast number of job losses when the official figures are announced on Friday.

Developments such as these have kindled optimism that the U.S. and other economies are on the road to recovery, and that global demand for raw materials and other key Canadian exports might soon revive.

As part of this rosier sentiment, another upleg in world oil prices past the $56 per barrel mark also assisted the Canadian dollar in setting new year-to-date highs just past the C$1.1700 figure.

"We've seen some new momentum in oil and a number of other commodity prices today, and so we're seeing the same thing happen with commodity-sensitive assets like the Canadian dollar," said senior currency strategist David Watt of RBC Capital Markets in Toronto.

Watt added that the negligible market response to leaked information about Thursday's planned release of the U.S. government stress tests of U.S banks demonstrates that "people are prepared to keep buying risk."

Barring any major downbeat surprises in either the bank test issue or Friday's Canadian and U.S. employment reports, the Canadian dollar could continue to rally towards its next major technical target in the C$1.1477 area, Watt suggested.

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

USD/CAD 1.1675 1.1809 1.1763 EUR/CAD 1.5560 1.5708 1.5669 CAD/JPY 84.18 83.31 84.19



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

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