The Canadian dollar rose nearly two-thirds of a U.S. cent Monday as the U.S. dollar slumped following a pledge by global finance chiefs to avoid a currency war that could derail the global recovery. The loonie closed up 0.63 of a cent at 98.01 cents (U.S.).
Finance ministers from the Group of 20 countries promised on the weekend to avoid competitive devaluations, which involve weakening a national currency to help exports and sustain economic recovery. But they offered no binding targets for smoothing out trade imbalances.
The feeling is that the ministers agreed to only the bare minimum to prevent a deterioration in investor sentiment in the short term.
But the promises were enough to help investors look past immediate threats of a currency war and focus on the main economic event on the horizon - the Federal Reserve's expected expansion of the U.S. money supply.
Markets fear that such a move, known as quantitative easing, could also further weaken the greenback.
"The currency markets were not fooled and promptly sold the U.S. dollar... including putting in a new low against the Japanese yen," said Andrew Busch, global currency and public policy strategist at BMO Capital Markets.
"The driving theme for the markets remains a lower U.S. dollar via [quantitative easing]for floating-currency countries and higher current account imbalances for managed-currency countries."
The falling U.S. dollar has driven commodity prices higher in recent weeks and made stocks more attractive as well.
That was the case Monday, with markets higher while oil and metals prices also advanced.
The December crude contract on the New York Mercantile Exchange was ahead 83 cents at $82.52 a barrel.
The December gold contract on the Nymex was ahead $13.80 at $1,338.90 an ounce, while the December copper contract in New York ran up seven cents to $3.86 a pound.Report Typo/Error
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