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Canadian dollar closes firmer, momentum seen strong

TORONTO: The Canadian dollar closed firmer on Tuesday, boosted by higher commodity prices and a general comfort with Canadian asset markets, traders said.

The currency closed at C$1.4370 (69.59 US cents) versus a close of C$1.4428 (69.31 US cents) on Monday.

"I think we really started the move a long time ago," said Steven Butler, director of foreign exchange at Bank of Nova Scotia.

There have been some mild corrections in the past few weeks in the unit, he said. "But we are still seeing good interest to buy the Canada on dips," Butler added.

One trader, who declined to be identified, said the currency was being carried forward by sheer momentum, underpinned by strong commodity prices, a relative calm in bond markets and a "degree of comfort" that the Bank of Canada will match the expected quarter-point interest rate increase from the Federal Reserve at its policy-setting meeting next week.

The benchmark CRB Index of commodity prices rose 0.97 points to 212.02 on Tuesday.

Butler agreed that commodity prices were a major factor but said that the conviction that the Canadian central bank will match a rate increase is not universal in the market.

However, he said there continues to be solid demand for the Canadian currency.

Bank of Canada Deputy Governor Charles Freedman made no specific mention of current interest rates in Ottawa on Tuesday, telling reporters that Governor Gordon Thiessen will address "policy questions" on Thursday in Halifax, Nova Scotia, where he is addressing a business group.

Also on Tuesday, Fed Chairman Alan Greenspan was due to testify before the US Senate at 10 a.m. EST (1500 GMT), but the hearing was cancelled because of a snow storm buffeting Washington. He was to discuss the US economic and budget outlook.

In cross-trading against major currencies, the Canadian dollar was at 73.70 yen and at C$1.4476 against the euro. The Canadian dollar was at A$1.0606 against the Australian dollar.-Reuters