Healthy global risk appetites kept the Canadian dollar on a rally

Healthy global risk appetites kept the Canadian dollar on a rally path alongside other currencies versus the U.S. dollar Tuesday, although the Canadian unit was unable to establish a new yearly high for the
first time in several sessions.

The U.S. dollar was trading at C$1.0807 at 3:40 p.m. EDT (1940 GMT), from C$1.0821 at 8:00 a.m. EDT (1200 GMT) and C$1.0896 late Monday.

Lacking any major domestic incentives Tuesday, the Canadian dollar’s gains on the day were mainly a function of the same factors that have driven the U.S. dollar relentlessly lower in recent weeks.

These included a continued positive tone for equities, commodities, and risk appetites in general, as well as overwhelming global negativity toward the U.S. dollar in light of the U.S. fiscal challenges.

By early Tuesday, these themes had sent the Canadian dollar to its intraday highs just through the C$1.0800 figure, although the currency ultimately was unable to penetrate Monday’s C$1.0789 intraday high, the Canadian currency’s strongest intraday level since early October 2008.

Currency watchers said that might reflect a newfound market reluctance to extend the Canadian dollar’s rally too far in front of Thursday’s Bank of Canada policy statement, although it may not ultimately be that significant.

“It may be suggesting a bit of hesitancy in taking U.S. dollar-Canada lower, but as far as we can say, we can’t be certain that there’s not more ground to run,” said currency strategist Sacha Tihanyi of Scotia Capital in Toronto. “The market is in a strong, heavy trend right now, and we haven’t seen any convincing signal that it can turn around yet.”