Canadian currency too surges against US dollar

March 20th, 2009 - 10:08 am ICT by IANS  

Toronto, March 20 (IANS) The Canadian dollar followed the euro and the pound to rise sharply against the US dollar Thursday.
Following the decision of the US Fed Wednesday to purchase $300 billion in longer-term treasury securities, the American dollar fell sharply against major currencies, including the euro which rose three percent against the greenback.

The Canadian dollar followed the same pattern Thursday, rising more than 2.3 percent against the greenback.

The loonie, as the Canadia dollar is called, was also helped by the prices of oil crossing the 50-dollar mark for the first time since December 1. The Canadian currency was also boosted by reports of higher monthly inflation as Statistics Canada said Thursday that prices rose 1.4 percent in February.

Just early last week, the Canadian currency had sunk to its lowest level in five years as markets tumbled. For the first time since September 2004, the loonie plunged to 76.53 cents US on the opening day of last week.

Since the fortunes of the Canadian dollar are linked to the nation’s vast oil and gold resources, it witnessed a huge rise as global oil prices began their steep climb in 2007. It reached the historic high of 110 cents US in November 2007.

Market analysts here predicted that Canadian and other currencies will be strengthened by the US Fed’s action to buy up $300 billion of long-term government bonds as part of its plan to pump more than $1 trillion into the economy.

The Fed action is likely to lead to inflation, making investment in US dollars less attractive, they said.

They said investors have started selling US dollars and turning to crude oil and gold bullion as reflected in higher gold futures contracts and oil prices Thursday.

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