Canadian dollar hits February high

The Canadian dollar hit its highest level against the US currency in nearly a month on Friday after US inflation data showed prices rose less than expected, calming markets made jittery by Thursday's surprise hike in the US discount rate.
The US Federal Reserve said late on Thursday it would increase the discount rate to 0.75 percent from 0.50 percent, effective Friday, although it left the benchmark federal funds rate, its main policy tool, unchanged near zero. The move pushed the US dollar higher on speculation that the Fed could move sooner than expected to raise its benchmark rate.
But US data on Friday that showed consumer prices excluding food and energy fell in January for the first time since 1982, supported the Federal Reserve's contention that it would keep its benchmark interest rate low for an "extended period", weakening the greenback again. "The Canadian dollar's had a great North American session. Obviously there was a lot of chaos overnight with the Fed hiking the discount rate unexpectedly," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"The outlook is still very favourable for Canada going forward." The price of oil, which often influences the Canadian dollar, rose toward $80 a barrel as refinery strikes in France and tensions about Iran's nuclear program raised concerns about supply.
Gold also reversed early losses, which further supported the commodity-linked currency. "Commodities in general are a little bit better today but I think the market is paying a little less attention," said Butler. "It should be paying a little less attention to the intraday swings in some of the commodity markets and focusing on the fact that the fundamentals in the Canadian economy are steadily improving," he said. "Against the global backdrop of everything else that's going on around us, Canada seems to be a relatively safe place at the moment."
The Canadian dollar closed at C$1.0405 to the US dollar or 96.11 US cents, up from Thursday's close at C$1.0414, or 96.02 US cents. Earlier, the currency hit C$1.0388 or 96.26 US cents, its highest level in nearly a month. It had weakened as low as C$1.0531, or 94.96 US cents earlier, under pressure from the Fed's discount rate hike. The Canadian dollar was one of the top performing major currencies on Friday, reaching its highest against the euro since October 2007 at C$1.4095.