Canadian dollar touches parity after Fed comments

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Malcolm Morrison
TORONTO— The Canadian Press
Published Thursday, Jan. 26, 2012 8:45AM EST
Last updated Thursday, Jan. 26, 2012 12:02PM EST

The Canadian dollar could be headed for its first close above parity with the U.S. dollar since late October as the currency gains traction following the U.S. Federal Reserve's vow to keep interest rates low to support the economy.

The loonie (CAD/USD-I1.000.0050.53%)rose 0.34 of a cent to 99.99 cents (U.S) after going as high as 100.05 cents earlier in the morning.

On Wednesday, the Fed said it would keep interest rates near zero until late 2014 in a sign that the economy needs considerable support for some time to come.

“Risk sentiment has been buoyed by the outcome of yesterday's FOMC meeting,” said a commentary from Barclays Capital Research.

“Overall, the extent of this forward guidance was beyond what markets currently expected, so amounts to an easing of monetary policy.”

Although the move signalled that the U.S. economy is still fragile, the central bank also indicated that another round of quantitative easing is being considered. Quantitative easing involves the Fed printing more money to buy bonds.

The Fed announcement encouraged traders to take on more risk and prices for oil and metals advanced.

The March crude contract (CL-FT100.481.081.09%) on the New York Mercantile Exchange gained $1.18 to $100.58 a barrel.

The March copper contract (HG-FT3.900.071.71%) on the Nymex rose five cents to $3.88 a pound while the February bullion contract (GC-FT1,722.1022.001.29%) advanced $26.20 to $1,726.30 an ounce.

There was also positive news out of Europe.

Italy easily raised