The Canadian dollar rose Tuesday after Australia announced it was slashing its interest rate by a quarter percentage point.The loonie climbed 0.24 of a cent to close at 99.56 cents (U.S.), surpassing a level not seen in more than two months.
A surprise move from the Reserve Bank of Australia to lower its official interest rate to 2.75 per cent, amid some signs of a weakening economy, ran against news from Japan.
Thes Nikkei index shot above 14,000 for the first time since 2008, on the first day traders were back from a holiday weekend. The index climbed 3.6 per cent to 14,180.24.
Raymond James analyst Kash Pashootan says that despite the small gains, the loonie is poised to soften against the greenback unless the Bank of Canada decides to change its interest rate.
"It's reasonable to expect the Canadian dollar to continue to soften relative to the U.S for most of this year," he said from Ottawa.
"That being said, I think the Bank of Canada will move on interest rates ahead of the U.S. Fed, and as a result, when the [bank] raises rates, even if it's marginal ... that will be the catalyst that turns the loonie around."
The last time the dollar was at parity was in early February.
Meanwhile, commodities continued to weaken after big gains last week. The June crude contract on the New York Mercantile Exchange fell 54 cents to $95.62 a barrel.
July copper dipped a penny to $3.30 a pound while June gold bullion was down $19.20 to $1,448.80 an ounce.