Loonie Rises as Libyan Uprising Spur Oil Prices to 29-Month High

The Canadian dollar strengthened as the unrest in Libya caused the prices for crude oil to jump to the highest level in 29 months, increasing attractiveness of the currencies related to economic growth.

The tensions in North Africa and Middle East have two-sided effect on the Canadian currency. On one side, they caused the market sentiment to shift towards risk aversion, which is negative for the loonie. On the other side, they caused the rally of some commodities, especially crude oil — the main export of Canada, which is positive for the currency.

April delivery for crude oil declined 1.3 percent to $96.82 per barrel on NYMEX after it has climbed as much as 5.4 percent to $103.41 per barrel, the highest level in 29 months. Libya produces 1.6 million barrels of oil per day (about 1.8 percent of global supply). The Thomson Reuters/Jefferies CRB Index of 19 raw materials jumped to the highest level since September 2008 before declining.

USD/CAD traded near 0.9818 as of 00:24 GMT today after falling yesterday from 0.9893 to 0.9826. EUR/CAD traded at about 1.3570 after yesterday’s decline from 1.3602 to 1.3559.

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