Canadian dollar touches two-month high

Canada's dollar hit a two-month high against the US currency on Friday, as commodity prices rose and results of European bank stress tests eased some worries about the region's financial system. Only eight of the 90 European banks surveyed by the European Banking Authority failed the stress tests, well below market expectations that as many as 15 lenders would need more capital to withstand a prolonged recession.
"The European stress test results somewhat allayed fears about Europe's credit crisis," said Sal Guatieri, senior economist with BMO Capital Markets. The Canadian dollar was stronger against most major currencies on Friday, also helped by the country's relatively healthy fiscal position compared to the United States and Europe.
"We should look to the crosses as being the bigger driver of (Canadian dollar) strength and US dollar movement," said Shaun Osborne, chief currency strategist at TD Securities. The Canadian dollar ended the session at C$0.9543 to the US dollar, or $1.0479, up from Wednesday's North American finish of C$0.9610, or $1.0406. Canadian government bond prices were higher across the curve, as the negative economic data spurred some investors to seek safe-haven assets. The two-year bond rose 10 Canadian cents to yield 1.417 percent. The 10-year bond was up 68 Canadian cents to yield 2.871 percent.