Canada's dollar rose to its loftiest level in eight weeks against the US currency on Friday, as the greenback slid on comments by a US Federal Reserve official that raised expectations of a further easing of monetary policy. The Canadian dollar soared as high as C$1.0188 to the US dollar or 98.15 US cents, its strongest level since August 6, as the US currency tumbled to a six month low against the euro.
The greenback fell after William Dudley, president of the New York Fed, said more action by the central bank to boost growth will likely be warranted unless the outlook improves. "It is a US dollar weakness story more than anything else. The reason for that weakness is that quantitative easing is very much on the table right now," said Eric Lascelles, chief Canada macro strategist at TD Securities.
Quantitative easing would expand the Fed's balance sheet through the buying of government Treasuries, a policy intended to stimulate spending and investments that have been lacking due to high unemployment and economic worries. The currency ended the day at C$1.0205 to the US dollar, or 97.99 US cents, comfortably higher from Thursday's finished at C$1.0290 to the US dollar, or 97.18 US cents. The Canadian dollar was up 0.5 percent for the week.
The weaker US dollar aided oil and gold prices higher, another area of support for the Canadian currency. Also supportive of the Canadian currency were gains in equity markets, boosted in part by Chinese manufacturing data and some US economic reports.
However, Jack Spitz, managing director of foreign exchange at National Bank Financial, noted the domestic currency has recently lagged against major crosses on lowered market expectations the Bank of Canada will hike rates in October.