Aryanews- The Canadian dollar hit its highest level in almost five months against the U.S. dollar on Wednesday, helped by firm oil prices, the prospect of rising Canadian rates and speculation it will return to parity with the greenback.
The currency reached as high as C$1.0216 to the U.S. dollar, or 97.89 U.S. cents, but quickly retreated as oil prices turned lower. Oil, which held above $81 a barrel, headed lower around noon. <O/R>
The euro was also volatile, traders said, which contributed to the Canadian dollar's hasty retreat.
At 12:47 p.m. (1747 GMT), the Canadian dollar was at C$1.0260 to the U.S. dollar, or 97.47 U.S. cents, compared with C$1.0264 to the U.S. dollar, or 97.43 U.S. cents, at Tuesday's close.
While the currency poked through the C$1.0225 level, its highest since October, the challenge remains whether the unit closes around these levels to signal a sustained move.
Market players are next eyeing the C$1.0207 level, the highest level reached in October, and could set up the currency for a run towards parity with the greenback.
"It would be more bullish for Canada if we got a close below C$1.0225, but just the fact that we got a lower low (in U.S. dollar terms) today is bullish," said David Bradley, director of foreign exchange trading at Scotia Capital.
"It's still our view that we are going to see this below parity by the end of the year. I think it's going to be a slow grind. I think it's only a matter of time before we see the parity level tested."
CIBC issued a note on Wednesday forecasting that the Canadian dollar would appreciate to $1.02, or 98.04 Canadian cents to the U.S. dollar, before falling below parity later in the year.
The Canadian dollar has closed higher in the past eight sessions, helped by the rising price of oil, further proof that a domestic recovery is taking hold, and a general view that interest rates will likely rise in the second half of the year.
"Canada still looks like a good news story as many of the global banks are jumping on board the interest rate differential story as well as the continuing commodity story," said Firas Askari, head of foreign exchange trading at BMO Capital Markets.
Bond prices were lower on data from China that added evidence the global recovery was underway, while new supply also weighed.
Chinese exports and imports grew faster than expected in February, underlining the momentum behind the world's third-largest economy.