The Canadian dollar continued to strengthen against its U.S. counterpart in Monday trading since Friday, following Bernanke’s speech which left the door open for further measures to stimulate the U.S. economy.
The loonie hit a three week high against the greenback early in the North American session shortly after the release of U.S. personal spending data which jumped 0.8 percent in July, easing fears the U.S. is heading into a recession. This boosted risk sentiment for risky and commodity-linked currencies like the Canadian dollar.
“There is a risk-on feeling to the markets,” said David Bradley, director of foreign exchange trading at Scotia Capital. “After Bernanke speaking last week, equity markets have rebounded quite nicely, so the Canadian dollar is testing towards the lows we’ve seen for the month.”
USDCAD dipped to its lowest level since August 5, touching 0.9738 compared to where it was at on Friday at its highest at 0.9921.
The Canadian dollar reacts strongly to U.S. economic data because the United States is Canada’s major trading partner, so if the U.S. economy grows, Canada will do better as well.