Metals Fuel Canada’s Dollar Advance

The Canadian dollar continued to advance today versus its U.S. counterpart as demand for commodities are still on the rise, favoring the loonie which is one of the currencies with the highest correlation with commodities charts, specially the crude oil, one of Canada’s chief exports.

The year of 2010 started with a very positive scenario for the Canadian currency which gained today before an employment report to be released this week, which, according to forecasts will bring optimistic figures, boosting the loonie’s appeal even higher as the crude oil is also providing support for the currency to remain bullish in foreign-exchange markets. The greenback lost versus its Canadian counterpart as an employment report frustrated U.S. investors, causing an exodus of capital from dollar-priced assets to higher-yielding currencies, once again, favoring the loonie.

Fundamental factors are backing the loonie as the Canadian economy recovers, but also, commodities and equities are pushing Canada’s currency up, making it to be the best bet in foreign-exchange markets in the beginning of 2010. The current rates for the loonie may cause the Bank of Canada to intervene on its rates, being that the biggest threat currently to stop the loonie’s rally.

USD/CAD traded at 1.0331 as of 17:45 GMT from a previous rate of 1.0394 yesterday. CAD/JPY rose to 89.57 from 88.06.

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