Canada dollar leaps to 4-1/2 mth high, bonds fall
The Canadian dollar extended its recent charge to close at its highest level in 4-1/2 months against the U.S. currency on Thursday, helped partly by a rise in oil prices and foreign interest in Canadian companies.Domestic bond prices turned lower alongside the bigger U.S. treasuries market, but the move was limited ahead of Canadian trade data on Friday and more key data next week.
The Canadian dollar closed at C$1.1345 to the U.S. dollar, or 88.14 U.S. cents, up from C$1.1398, or 87.73 U.S. cents, at Wednesday’s close.
The resource-linked currency, which has recorded sharp gains all week to return to levels not seen since last November, took advantage of a slew of Canadian dollar-positive events, most notably a 3 percent jump in oil prices.
“It’s the rising energy prices … continued news on the M&A activity which is bullish for the Canadian dollar and the U.S. dollar itself was a little weaker,” said Carlos Leitao, chief economist at Laurentian Bank of Canada.
“The trend right now is very strong and the (Canadian) dollar doesn’t seem to want to come down so it’s going up.”
The latest report of potential foreign interest in Canada involved steelmaker Ipsco Inc. (IPS.TO: Quote), which has a market capitalization of about C$7.8 billion, and said on Thursday it was in discussions that could lead to a sale of the company.
The Canadian dollar had little reaction to a report showing new housing prices rose 0.5 percent in February from January, as analysts said last week’s strong jobs data and signs of building inflation were still driving the currency.
Recent strong data has quieted previous talk of Bank of Canada interest rate cuts, and prompted analysts to start speculating about the timing of possible rate hikes, which would raise the yield on Canadian investments and boost the currency.
In a speech in Montreal, Bank of Canada Deputy Governor Sheryl Kennedy did not talk about the country’s economic outlook or the central bank’s upcoming rate decision.