Tuesday, June 05, 2007

Canadian Dollar is surging, many predicting par with US Dollar by end of 2007


Canadian dollar surges on expectations of rate hike; stocks mixedPublished: Tuesday, May 29, 2007 10:39 AM ET
Canadian Press: MALCOLM MORRISON
TORONTO (CP) - The Canadian dollar surged almost three-quarters of a U.S. cent Tuesday morning, charting territory last visited 30 years ago, after the Bank of Canada hinted at a rate hike "in the near term."
The Toronto stock market was little changed after posting gains for the last two sessions with energy stocks under pressure from a sharp drop in oil prices.
An investor watches the stock price monitor at a securities company Tuesday in Shanghai, China. (AP Photo)
The loonie was up 0.72 of a cent to 93.29 cents US - its highest level since September 1977 - after the Bank of Canada announced it's leaving its key interest rate unchanged at 4.25 per cent but warned of rising inflationm.
"There is an increased risk that future inflation will persist above the two per cent inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target," the central bank said.
However, analysts were not convinced a rate hike is in the offing.
"I still don't believe the bank will have room to tighten given recent news of lumber mill shutdowns (due to the dollar) and increased opposition to currency appreciation by manufacturers," said Andrew Pyle, investment adviser at Scotia McLeod in Peterborough, Ont.
The currency has risen about 8.7 per cent this year, partly in the belief that the Bank of Canada will raise interest rates later this year to cool inflation. It has also been supported by a string of positive economic reports, higher commodity prices and corporate acquisition activity that has boosted demand for Canadian dollars.
New York markets were higher after consumer confidence bounced back unexpectedly in May.
Toronto's S&P/TSX composite index slipped 3.3 points to 14,070.44.
A big early mover was transport giant Bombardier Inc. (TSX:BBD). Its shares jumped over 10 per cent to $5.30 after first-quarter profit more than tripled to US$79 million, from US$24 million a year earlier.
The TSX Venture Exchange climbed 11.39 points to 3,237.52.
In New York, the Dow Jones industrials were up 25.6 points to 13,532.88.
The New York-based Conference Board said its consumer confidence index rose to 108.0 in May, up from a revised 106.3 in April, mainly because of "a more upbeat assesment of present-day business conditions."
The Nasdaq composite index rose 13.29 points to 2,570.48 and the S&P 500 index added 3.05 points to 1,518.78.
Also Tuesday, Standard & Poor's releases its home price index and the Dallas and Chicago Federal Reserves will report on regional manufacturing activity.
And on Friday, the U.S. non-farms payrolls report for May comes out.
The TSX energy sector lost 0.4 per cent as oil prices fell Tuesday, reflecting hopes that the inauguration of a new president in OPEC member Nigeria would contribute to stability in the market. Light sweet crude for July delivery fell $1.19 to US$64.01 a barrel on the New York Mercantile Exchange.
Suncor Energy was down 42 cents to $93.10.
Shares in Pacific Energy Resources Ltd. (TSX:PFE) rose eight cents to $3.22 after it announced it is paying US$448 million plus 5.5 million shares for all Alaska oil and gas properties and operations owned by Forest Oil and Forest Holding.
In other news:
-A consortium led by Royal Bank of Scotland said Tuesday it will launch a bid of 71.1 billion euros (US$95.5 billion) for ABN Amro, topping a friendly offer from Barclays PLC and pressing Bank of America Corp. for control of the Dutch bank's U.S. arm.
-The Wall Street Journal says telecommunications gear maker Avaya is negotiating with possible buyers, which may include Nortel Networks (TSX:NT). Nortel shares were up 36 cents to $28.11.
-FNX Mining (TSX:FNX) said drilling continues to expand its finding of "high-grade" copper, nickel, platinum, palladium and gold at the Levack footwall deposit in Sudbury, Ont. The report came a day after FNX shares jumped 10 per cent to a new closing high of $34.71 after the company quadrupled its resource estimate at properties other than the Levack footwall. On Tuesday morning, its shares rose 16 cents to $34.87.
Overseas, London's FTSE 100 index rose 28.8 points to 6,599.3.
Frankfurt's DAX 30 climbed 38.47 points to 7,777.67 and the Paris CAC 40 declined 10.43 points to 6,061.04.
In Tokyo, the Nikkei 225 index rose 84.97 points, or 0.48 per cent, to finish at 17,672.56 points.
In Hong Kong, the blue-chip Hang Seng Index fell 60.17 points, or 0.29 per cent, to 20,469.59.
Investors are expecting China to issue more tightening measures to cool the domestic stock market after the benchmark Shanghai composite index rose to a third consecutive record high. The Shanghai index ended up 1.5 per cent at a record close 4,334.92 as new investors continued to pour into the stock market.

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