Loonie nears 4-week high

The Canadian dollar started 2012 on a positive note on Tuesday, climbing to its strongest in nearly four weeks against the U.S. dollar as healthy global economic data and rising oil prices prompted investors to load up on Canada’s currency.

Signs of improvement in China’s manufacturing sector and a surprise drop in German unemployment lifted global stocks and the euro, while rising tension in the Middle East Gulf pushed Brent crude above $110 a barrel, further boosting Canada’s commodity-driven currency.

U.S. stock index futures also pointed to a higher open on Wall Street, with U.S. ISM manufacturing index for December due to be released at 10 a.m. (1500 GMT), while the Federal Open Market Committee releases minutes from its Dec. 13 meeting at 2 p.m.

The currency strengthened to as much as C$1.0080 against the safe-haven greenback, or 99.21 U.S. cents, its firmest since Dec. 8.

“There’s a bit of a positive bias toward the Canadian dollar, predicated on $100-plus barrel of oil,” said Michael O’Neill, vice-president of foreign exchange trading at RJOFX Canada.

U.S. crude futures rose more than $2 to nearly $101 a barrel.

“Canada is a nice little uptrend channel from pretty much the middle of December on the short-term chart. The channel remains intact at C$1.0190 to the top and C$1.0030 on the bottom so Canada should keep grinding higher in the confines of this,” O’Neill added.

At 9:13 a.m. (1400 GMT), the Canadian dollar stood at C$1.0102 to the U.S. dollar, or 98.99 U.S. cents, up from Friday’s North American session close at C$1.0170 versus the greenback, or 98.33 U.S. cents.

Canadian financial markets were closed on Monday for the New Year holiday.
Canada was a mediocre performer among G10 currencies in 2011, down 2.2 percent after a roller-coaster second half of the year during which sentiment was buffeted by headlines about the European debt crisis. In 2010, the Canadian dollar had a 5.7 percent gain against the greenback.

“USD/CAD is on the verge of registering a bearish trend reversal below 1.0171 as the risk backdrop firms to begin the New Year,” George Davis, chief technical analyst at RBC Capital Markets, said in a note to clients, noting near-term U.S. dollar support at C$1.0051.

Canadian bond prices fell across the curve, taking their cue from sagging U.S. Treasuries in thin trade.

The two-year bond lost 7 Canadian cents to yield 0.986 percent, while the 10-year bond slipped 27 Canadian cents to yield 1.974 percent.

© Thomson Reuters

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