The Canadian dollar was at a fresh three-and-a-half-year high above 104 cents US Wednesday amid record high gold prices while oil approached the US$109 mark.
The currency was off early lows, but still up 0.5 of a cent to 104.25 cents US. It earlier surged as high as 104.5 cents US, its highest level since November, 2007.
"To be fair, a large part of it is U.S. dollar-driven," said Mark Chandler, head of Canadian FIC Strategy at RBC Dominion Securities, who noted that most of the major currencies were up significantly against the U.S. greenback.
Investors looking for a safe haven sent the June bullion contract on the Nymex up $6.60 from Tuesday's record close to US$1,459.10 an ounce after going as high as US$1,462.10 earlier in the morning.
The May crude contract on the New York Mercantile Exchange gained 41 cents to a two-and-a-half-year high of US$108.75 a barrel despite a report from the American Petroleum Institute showing that crude inventories fell a greater than expected 2.8 million barrels last week. Analysts had forecast an increase of 1.3 million barrels.
However, inventories of gasoline rose unexpectedly by 568,000 barrels and crude supplies at the key U.S. storage facility in Cushing, Oklahoma rose 120,000 barrels, the API said.
Crude prices are still up more than 27 per cent from mid-February because of fears the fighting in Libya could spread and interrupt supplies from the big producers in the Persian Gulf, such as Saudi Arabia. Higher demand resulting from an improving global economy has also pushed prices higher.
Copper prices also advanced with the May contract in New York ahead 11 cents to US$4.37 a pound.
The U.S. dollar also weakened against the euro a day before the European Central Bank is expected to make its first rate hike in nearly three years to deal with inflation. A quarter percentage point increase in the main rate to 1.25 per cent is fully priced in by the markets so investors will be more interested in what the central bank's president Jean-Claude Trichet says in his press conference.
Traders are also looking ahead to a solid Canadian employment report at the end of the week. Statistics Canada is expected to report Friday that the economy added about 30,000 jobs in March and that data could further strengthen the currency.
"The story for (the Canadian dollar) is quite supportive," said Chandler.
"The reason Canada does well in the risk appetite movement is it's a small, open economy, very leveraged on trade. We've been having good news generally in growth."
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