Canada's currency raced higher versus the US dollar on Friday and touched its highest level in nearly eight months as commodity prices surged and upbeat economic data sideswiped the greenback. After hoarding US dollars during the worst of the global financial crisis, investors have started to unload the currency because of continuing signs that the worst of the global recession may have passed.
"It really was less of a Canadian dollar story and more of a US dollar story as the US dollar itself was weak across the board," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "The Canadian dollar was just moved along with the other commodity, cyclical, risk-type currencies ... in conjunction with the better appetite for global risk."
A good chunk of the Canadian dollar's surge came after data showed the US economy contracted less than initially expected in the first quarter, which diminished the safe-haven allure of the greenback. That data helped add to gains already under way as signs of economic strength from Japan and India overnight gave a bid to Canada's currency.
The Canadian dollar rose to C$1.0898 to the US dollar, or 91.76 US cents, shortly after midday, its highest level since October 6, extending its torrid climb since falling to a four-year low in early March. Other factors helping to fuel the rally were a jump in oil prices to a six-month high and a three-month high in gold prices.
The currency retreated a touch but still ended the session at C$1.0917 to the US dollar, or 91.60 US cents, which was nearly 2 US cents above Thursday's close of C$1.1148 to the US dollar, or 89.70 US cents. The Canadian dollar has now stormed 19.7 percent above its March low, a move credited to a combination of higher prices for key Canadian commodities, some upbeat economic data and lower demand for the US dollar.
The Canadian dollar rallied 9.3 percent in May, its biggest monthly gain since at least October 1950, according to Bank of Canada data that dates back to 1950. The Canadian dollar did not appear to be affected by a report that showed Canada's current account deficit widened to a record high.