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Canada dollar ends firmer on higher commodity prices

TORONTO: The Canadian dollar climbed higher on the back of stronger prices for oil and other commodities to close at C$1.4494 on Thursday.

A surge of strength in the Australian dollar overnight provided an extra boost for the Canadian unit in earlier trading.

"Probably the strength in the Aussie dollar was the first thing you would have noticed when you walked in the door," said Mike Wissell, managing director of foreign exchange with T.D. Securities Inc.

Improved oil prices and an increase in the CRB commodities index were also supportive for the Canadian unit, he added. The CRB index was up 1.79 to 207.04 late on Thursday.

The currency logged most of its gains in early trading, hovering around C$1.4490 for most of the session from Wednesday's C$1.4536 close.

Trading in the currency was "heavy," Wissell said.

The improved tone in the Canadian bond market also reassured investors and provided more incentives for investors to buy the Canadian currency, he said.

Rick Egelton, deputy chief economist at the Bank of Montreal, agreed that the strength in the Canadian bond market was related to the currency's relatively buoyant tone.

"The factors that are leading the bond market to improve are causing the Canadian dollar to slightly improve," he said.

Egelton also cited firmer commodity prices as a source of strength for the Canadian unit. "I think what we're seeing is a firming in commodity prices - particularly on the oil side," he said.

"We're looking at still increasingly strong growth prospects outside of North America....which is even better for commodity prices," he added.

Strong domestic economic data have also helped buttress the Canadian dollar by easing fears the Bank of Canada may be reluctant to match interest-rate increases from the U.S. Federal Reserve, Egelton said

"I think the recent spate of extraordinarily good news we've had on Canada has really, in the market's mind, suggested that the Bank of Canada is going to move lock-step with the Fed, at least on the next couple of moves," he said.

In cross-trading against major currencies, the Canadian dollar was at 73.11 yen and at C$1.4862 against the euro EURX. The Canadian dollar was at A$1.0318 against the Australian dollar.-Reuters