Published: Thu, 19 Feb 2009 22:02:51 +0100

Canadian Dollar Underperforms Despite Strong Rise in Oil

(CEP News) - Oil prices continued to climb higher on Thursday and are close to testing resistance at $40 a barrel. Nevertheless, the jump in prices has not supported the Canadian dollar.

The loonie is showing modest gains against the U.S. dollar, but has been a laggard behind other commodity currencies like the Australian dollar and the Norwegian krona.

Earlier today, the loonie broke through support, hitting a low of 1.2486 CAD, but was unable to hold the gains and is up only 0.27 cents to 1.2582 CAD.

George Androulidakis, director of FX trading at the National Bank of Canada, said the breakdown in several market correlations today suggests that markets are moving without any direction. He pointed out that the Canadian dollar is not tracking oil and that the Japanese yen is not tracking equity markets.

"I think you are seeing a trend where nobody knows where the trend is," he said.

Androulidakis said it's risky to bet against the U.S. dollar in this environment.

Tyson Wright, senior FX trader at Custom House, said the USD/CAD appears to be stuck in a range with support at 1.2460 and 1.2670.

"I am surprised that we haven't tested 1.27 CAD after breaking through 1.25 CAD," he said. "I think we are going to need some new information to propel the Canadian dollar one way or another."

Euro/USD up 1.27 cents to 1.2658

USD/CAD down 0.18 cents to 1.2592

USD/Yen up 0.52 points to 94.31

GBP/USD up 0.73 cents to 1.4285

AUD/USD up 0.58 cents to 0.6429

Euro/Yen up 1.84 points to 119.36

Euro/GBP up 0.44 pence to 0.8861

GBP/CAD up 0.69 cents to 1.7990

CAD/Yen up 0.52 points to 74.89

The U.S. Dollar Index is down 0.57 points to 87.44

All data taken at 4 p.m. EST.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca