TORONTO — The Canadian dollar rose to its best level in more than three and a half years against the U.S. dollar on Tuesday, as debt fears in the United States continued to slam the greenback.
The currency climbed as high as US$1.0625, its strongest level since November 2007, when it hit a modern-day high.
The U.S. dollar fell across the board, plunging to a record low against the Swiss franc, as a speech by U.S. President Barack Obama gave no sign of a swift breakthrough in deadlocked talks to raise the U.S. debt ceiling.
Commodity prices such as oil also rallied on a weaker U.S. dollar, though investors shrugged off fears that a U.S. default would undermine the appetite for riskier assets, while a run of strong earning reports further boosted market sentiment.
“The political brinksmanship that’s being played out south of the border is clearly having an impact on the U.S. dollar,” said Jack Spitz, managing director of foreign exchange at National Bank Financial, noting talk of central banks’ reserves diversifying out of the U.S. dollar and into other currencies, such as Canada’s.
“Pretty well every currency is trading as a safe-haven currency when compared with the U.S. in terms of its current environment but that could change on a dime.”
The United States edged closer on Tuesday to a devastating default as Republicans and Democrats were deadlocked over competing plans to raise the debt ceiling, one week before a deadline to act.
At 8:09 a.m., the currency stood at US$1.0620, up from Monday’s North American session close at $1.0573.
Spitz said there was no major technical resistance for the Canadian dollar on its way to the November 2007 high, when the currency hit $1.10.
“From a technical perspective, it’s air below the calendar low in dollar/Canada until we get to the modern day low,” he said.
Psychologically, he noted investors will look at international money market levels, with C$0.9345 versus the U.S. dollar, or $1.07 as the next major mark insight.
Canadian government bond prices were little changed across the curve, outperforming U.S. Treasuries as the deadlock in Washington showed no sign of easing.
The two-year bond was off 1 cent to yield 1.511%, while the 10-year bond was down 2 cents to yield 2.934%.
Thomson Reuters
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