Libya uprising puts C$ in a tight range

TORONTO: Canada's commodity-driven currency was little changed against the US dollar on Wednesday as investors weighed market fears over Libya's violent uprising against a surge in oil prices.

US crude prices surged to a 28-month high of $100 a barrel as the revolt in OPEC producer Libya caused a cut in output there and investors bet the unrest could spread to other oil exporters in the region.

Stronger crude prices typically help the Canadian dollar, as Canada is a significant oil exporter. But rising oil prices have also fanned concerns that they could inspire inflation, which might hamper global economic recovery.

"Canada is flat. We're struggling between the jump higher in risk aversion over the last couple days versus the jump higher in oil prices," said Camilla Sutton, chief currency strategist at Scotia Capital.

US stocks tumbled for a second day on Wednesday as the spike in oil drove investors to seek safer-haven assets and fueled worries of a market correction.

"Markets are really just trying to digest what higher oil prices mean," Sutton said. "Is it good for Canada in the sense that it brings in more revenues to the West and oil exporting provinces or is it actually negative in the sense that it weighs on the fragile US recovery?"

The dramatic rally in oil dragged broadly on the US dollar, as higher energy costs tend to ripple through the economy, pushing up the costs of utilities, manufactured goods and transportation.

As investors shunned the greenback, another safe-haven currency, the Swiss franc, neared a record high, while the euro and sterling also rose on the back of heightened expectations that interest rates will rise faster in the euro zone than in the United States.

The Canadian dollar finished at C$0.9886 to the US dollar, or $1.0115, slightly up from Tuesday's North American session close at C$0.9909 to the US dollar, or $1.0092. During the day, the currency slipped as low as C$0.9960 to the US dollar, or $1.0040, its weakest point since Feb. 11.

Sutton said that weakness was partly driven by rumours of merger and acquisition activity that could be negative for the Canadian currency.

She said the next immediate range for the Canadian dollar should be close to Wednesday's overall move between C$0.9858 to C$0.9960.

No major Canadian data is scheduled for the rest of the week.