TORONTO: The Canadian dollar strengthened against its US counterpart on Thursday as the commodity-linked currency benefited from the Swiss central bank's shock withdrawal of a cap on the safe-haven franc.
The move, which sent the franc soaring, boosted commodities from crude oil to gold and prompted traders to scale back bets on a further rise in the value of the greenback.
"The Swiss National Bank's move to effectively drop their defense of the 1.20 euro/Swiss floor has created volatility, which in turn is creating an environment that causes short crude to come back, short commodity prices to come back," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"The (US) dollar is faltering marginally, commodity currencies are rising as commodity short positions are being squared," he said. "The Canadian dollar has rallied on the back of this."
The Canadian dollar was at C$1.1925 to the greenback, or 83.86 US cents by 9:30 a.m. (1430 GMT), stronger than Wednesday's close of C$1.1945, or 83.72 US cents.
The loonie, as Canada's currency is colloquially known, has weakened significantly in recent months as the price of crude oil has plunged.
Spitz said none of the fundamentals affecting the loonie had changed with the Swiss news, and that any further gains would be tied to a sustained rebound in crude prices.
Canadian government bond prices were higher across the maturity curve, with the two-year up 2.5 Canadian cents to yield 0.874 percent and the benchmark 10-year was up 15 Canadian cents to yield 1.559 percent.
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