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$10 dollar bills at par (CHRIS YOUNG/Chris Young/CP)
$10 dollar bills at par (CHRIS YOUNG/Chris Young/CP)

Dollar rises after Carney remarks on commodities Add to ...

The Canadian dollar made strides against the U.S. greenback Monday following a weekend inflation warning from the country's top central banker, who suggested interest rates may not be on hold much past the May 2 federal election.

The loonie gained 0.54 of a cent to close at $1.0240 cents (U.S.) even as commodity prices backed off.

Oil prices fell $1.42 to $103.98 a barrel on the New York Mercantile Exchange. The April gold contract fell $6.30 to $1,419.90 an ounce on the Nymex, while the May copper contract lost 7 cents to $4.35 a pound.

Over the weekend, Bank of Canada Governor Mark Carney told a meeting of Western Hemisphere finance ministers that sustained growth in emerging economies means high commodity prices are expected to stick around for a long time.

"Everything else being equal, higher commodity prices usually necessitate higher policy rates," Mr. Carney said.

Bob Tebbutt, vice-president of Peregrine Financial Group Canada Inc., noted that it is odd that the loonie gained strength Monday despite a rising U.S. dollar and weaker commodity prices.

"Possibly strong because of the Governor of the Bank of Canada stating that the commodity price boom will continue for an extended period and is urging his counterparts in other countries to move quickly on raising interest rates to counter the rise in commodity prices," Mr. Tebbutt said.

"This is being thought as an indication that he is ready to raise rates in Canada again."

The next scheduled announcement on interest rates from the Bank of Canada is April 12, although the central bank isn't expected to change its policy rate at that time from the current one per cent. Another announcement is scheduled for May 31, after the election.

Meanwhile, the Canadian dollar could also find lift on Thursday when Statistics Canada releases gross domestic product figures for January. Economists expect the economy grew by 0.5 per cent from December.

On Tuesday, Ontario Finance Minister Dwight Duncan will deliver that province's budget.

The Canadian dollar edged up 0.3 per cent last week despite a slight, late-week dip.

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