The Canadian dollar reached its highest level in six months yesterday, climbing from a low of CAD$1.30 per U.S. dollar to $1.18 today. This comes as investors speculated that the worst of the financial crisis may be over. The Canadian dollar appreciation mirrors gains in both the U.S. and Canadian stock markets and a possible bottoming out of commodity prices.
Canada’s economy is closely linked to global oil prices and other commodity exports, with the lumber industry, in particular, optimistic about the slight up-tick in the U.S. housing market. This, coupled with better than expected manufacturing output in China, appears to be fueling a greater appetite for investment in more commodity-dependent currencies like the Canadian dollar. No major Canadian economic data will come out today, but markets will be watching as employment and housing reports come out later in the week.