TORONTO - The Canadian dollar got a big lift Wednesday as commodity prices and investor confidence bounced back from panic over European debt and Korean tensions earlier in the week.
The loonie gained 1.16 cents to 98.90 cents US.
The Canadian currency outperformed most others, supported by strong commodities prices, moderately positive economic data from the U.S. and a rise in Canadian stocks as the mood of markets improved.
The S&P/TSX composite index was up 108.24 points at 12.901.99.
The January crude contract was up $2.61 at US$83.86 a barrel on the New York Mercantile Exchange, while the December copper contract on the Nymex was up five cents at US$3.75 a pound.
December gold slipped $4.60 to US$1,373 an ounce.
Late in the afternoon in New York, the euro slid to $1.3330 from $1.3374 late Tuesday. It had earlier touched a two-month low at $1.3284 because of concerns that Ireland's economic woes could broaden across the European Union.
Meanwhile, investors seized on encouraging readings for the U.S. labour market and the income of Americans on Wednesday, while shrugging off a steep fall in new home sales and manufacturing orders. The mildly positive data further bolstered the Canadian dollar.
There were also reports that Russia began adding the Canadian dollar to its international reserves.
"There is some relief in markets on the Korean front, which has allowed the commodity currencies to retrace some of yesterday's move," Scotiabank currency analysts wrote in a report.
"The recent weakness in (the loonie) has been due to rising risk aversion; which has created a temporary breakdown in the co-movement of the currency with some of its drivers."
Meanwhile, reports Tuesday showing higher than expected inflation and rising retail sales in Canada increased expectations that the Bank of Canada might raise interest rates, which would support the loonie's upward momentum. However, those reports had been overshadowed by negative global concerns Tuesday, helping to explain the big gain Wednesday, the Scotiabank report said.
