Gold helps C$ close in on US85¢

RESOURCE RALLY

A rise in the gold price helped Canada’s dollar climb to US84.84¢ yesterday from US84.39¢ Thursday. One U.S. dollar buys $1.1792.

“Stronger gold should be good for the Canadian dollar, bad for the U.S. dollar and the U. S. data this morning has been mixed,” said Shaun Osborne, currency strategist at Scotia Capital in Toronto.

The price of gold is close to the highest in 17 years. Energy and other commodities account for about 10% of Canada’s gross domestic product.

Oil and the Canadian dollar have moved in the same direction about 85% of the time in the past three months, according to Bloomberg data. Energy and other commodities account for about 35% of Canada’s exports.

“ The Canadian dollar is widely viewed as a beneficiary of high energy prices given Canada’s position as a major exporter of oil and gas,” wrote Michael Woolfolk, currency strategist at Bank of New York in a note to clients.

Mr. Woolfolk expects the bank to raise interest rates by 25 basis points in October and said that as long as the price of oil holds above US$60 a barrel, the currency could rise to US86.96¢ by year-end.

Canada’s dollar has appreciated 11.4% against the euro in 2005 and is near the strongest level since June, 2002, according to Bloomberg data. Against the yen, the Canadian dollar is up 9.5% since the beginning of the year.

In other markets, the U. S. dollar rose against the yen after government reports showed foreign investors increased their net holdings of U. S. assets and the currentaccount deficit narrowed for the first time since 2003.

Against the yen, the U. S. dollar advanced to 111.34 at 5 p.m. in New York, from 110.64 late Thursday. The U.S. dollar was at US$1.2234 per euro from US$1.2224. The U.S. currency gained 1.5% against the yen and 1.4% versus the euro for the week.