The Canadian dollar extended its previous sessions' rally versus major currencies on Tuesday morning in New York as a surge in crude oil prices increased demand for resource-linked assets. The Canadian dollar climbed to a fresh 1-year high against the US dollar and a 5-day high against the euro and yen.
Crude oil prices rallied again today and moved above $71 per barrel. Light sweet crude oil rose to $71.84 per barrel, up $1.43 on the session. Prices reached as high as $71.92. The crude price rose after an across-the-board gain for commodities as the U.S. dollar continues to fall.
The greenback fell in the morning after a report that Gulf Arab states were in talks with other states to replace the U.S. dollar with a basket of currencies in oil trading. But the report was rapidly denied by senior officials from leading oil producers Saudi Arabia, Russia, Kuwait and the United Arab Emirates.
In economic news, Canadian building permits rose to C$5.0 billion in August, up 7.2% from July, the Statistics Canada reported today. That was much higher than the 10.0% revised decline in July and beat consensus forecast of 4.5% increase.
The Canadian dollar rose to 1.0567 against the US dollar by 10:10 am ET Tuesday, the highest level since October 1st, 2008. The greenback-loonie pair is presently worth 1.0577 with 1.032 seen as the next target level. The Canadian currency closed Monday's trading higher at 1.0697 against the buck.
As there is no first-tier economic data to consider from its southern neighbor, traders are likely to focus the start of earnings season, which kicks off Wednesday afternoon.
The Canadian dollar that closed yesterday's deals at 1.5669 against the European currency gained more than 0.6 percent to reach a 5-day high of 1.5568 around 10:10 am ET. A rise above the 1.556 level may push the domestic unit to its highest in nearly a month.
Recent improvements in economic indicators are showing only green shoots of recovery, while there remain considerable downside risks, European Central Bank governing council member Axel Weber said today.
Speaking to the International Monetary Fund's board of governors at the IMF-World Bank Annual Meetings 2009 in Istanbul, Weber, who also heads Bundesbank, said until the global economic recovery becomes self-sustaining, there is a need to continue policy stimulus, which are currently in place.
Meanwhile, Germany's construction sector activity dropped for a nineteenth straight month in September, a report by the Markit Economics said today. The seasonally adjusted Construction Purchasing Managers' Index or PMI rose to 43.8% from 43.6 in August. The PMI reading above 50 indicates expansion, while a reading below 50 signals contraction.
The Canadian dollar also advanced to a 5-day high of 84.2 against the Japanese yen around 11:10 am ET and this may be compared to yesterday's close of 83.77. If the loonie gains a few pips higher, it may reach near a 2-week high in near-term.
Today Japanese Finance Minister Hirohisa Fujii said he does not believe that the Bank of Japan will take a decision this month to scrap some of its emergency funding measures.
His remarks follow a report published in The Nikkei on its Tuesday morning edition, which said the Japanese central bank is discussing the termination of its outright purchases of commercial paper and corporate bonds at the end of this year. These purchases are now being carried out as part of emergency funding relief measures.
But, the minister said the central bank is expected to carefully monitor the economy before making such a decision given the fragility of the economy. Fujii noted that current economic conditions in Japan warrants continuation of stimulus measures, though there are signs of recovery.
The Reserve Bank of Australia unexpectedly lifted their key interest rate by 0.25% to 3.25%, fueling speculation that other nations in position to raise interest rates will soon begin to do so.
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