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Canada dollar rebounds on commodities, stock surge

TORONTO: The Canadian dollar ended slightly higher on Friday after strength in commodities and in Canadian equity markets enabled it to fight back from earlier lows, market watchers said.

The Canadian dollar closed at C$1.4410 (69.40 U.S. cents) on Friday after closing at C$1.4420 (69.35 U.S. cents) in the previous session.

After opening around C$1.4420, there was a quick flurry of activity that pushed the currency down to the C$1.4440 area after news that U.S. nonfarm payrolls surged by a larger-than-expected 387,000 in January.

Earlier news that Canadian employment grew by 44,300 in January exceeding an expected rise of about 26,000 had little direct impact on the currency. Some analysts said the Canadian job news helped the currency weather the impact of the larger-than-expected U.S. jobs increase.

Later in the session the currency started to spiral lower, touching the C$1.4470 area. Corporate interest in buying the U.S. dollar against the Canadian unit helped propel the move lower, traders said.

"We took some dollars out of the market in the mid-C$1.4440s - a corporate customer paid us - and actually we took quite a few," said one Toronto currency trader with a major Canadian bank.

That activity pushed the Canadian dollar through the C$1.4450 level, triggering stop loss orders and carrying it up briefly to the C$1.4470 neighbourhood.

"That last push up was just short-covering," the trader said.

The Canadian unit struggled back from its lows after receiving some assistance from stronger gold prices and surging Canadian equities markets, observers said.

The Toronto Stock Exchange Composite 300 Index ended up 314.81 to 9209.20, a record high close.

Avery Shenfeld, senior economist, said the combination of stronger equities, higher commodity prices and narrowing negative yield spreads between the Canadian and U.S. bond curves should have allowed the Canadian dollar to put in a stronger performance on Friday.

"The Canadian dollar actually could have been doing better," Shenfeld said. "If you look over the past little while, we've had some good movements in commodities, particularly gold and oil."

"That combination should be generally favourable for the Canadian dollar, and what's been frustrating is that it hasn't even done better," he said,

With many speculative players having already taken out long positions on the Canadian dollar, "there simply may not be a new marginal buyer out there," he added.

Volumes in the currency were average on Friday, the trader said.

In cross-trading against major currencies, the Canadian dollar was at 74.38 yen and at C$1.4142 against he euro. The Canadian dollar was at A$1.0895 against the Australian dollar.-Reuters