* C$ ends at 95.38 U.S. cents
* Buoyed by commodities, economic outlook
* October GDP up, but slightly weaker than forecast
(Updates to close)
By Ka Yan Ng
TORONTO, Dec 23 (Reuters) - The Canadian dollar finished
higher against the U.S. currency for a fourth straight session
on Wednesday, lifted by rising oil prices and hopes for a solid
economic recovery, and the potential for further
diversification by foreign central banks.
The Canadian dollar hit a more than two-week high against
the U.S. currency after Finance Minister Jim Flaherty said in
an interview with Bloomberg that China and Russia may diversify
their currency reserves into Canadian dollars. [FRX/]
The currency's gains came on the heels of remarks by Prime
Minister Stephen Harper that Ottawa will be fiscally
disciplined as the government continues stimulus spending until
An oil price that rose above $76 a barrel was also
supportive for the Canadian dollar, as was a positive tone to
equity markets on Wednesday. Strength in equities and oil are
often key supports to the Canadian dollar, as a gauge of risk
"It's a perfect storm for the Canadian dollar," said
Camilla Sutton, currency strategist at Scotia Capital.
The currency pared some gains after data showed the economy
grew at a slower pace than expected in October, although
analysts said the details of the GDP report were encouraging as
it marked the first back-to-back monthly gains in two years.
The economy grew by 0.2 percent in October from September,
the second consecutive monthly increase, but below analysts
expectations for a 0.3 percent increase from September.
Canada officially emerged from recession in the third
quarter of this year.
"It was slightly below consensus, attracting some bids into
dollar/Canada but nothing dramatic," said Jack Spitz, managing
director of foreign exchange at National Bank Financial.
"There is clearly a directional bias to buy North American
and sell Europe."
By session's close, the Canadian dollar had fully recovered
its post-GDP move. It finished at at C$1.0484 to the U.S.
dollar, or 95.38 U.S. cents, up from Tuesday's finish at
C$1.0579 to the U.S. dollar, or 94.53 U.S. cents.
While ongoing optimism about the recovery added to positive
momentum for the currency, market watchers cautioned that price
moves across most markets are easily swayed by thin pre-holiday
BONDS TURN HIGHER
Canadian bond prices largely shrugged aside the slight miss
on the GDP data, but turned higher as a pair of U.S. economic
indicators breathed new life into safe haven plays.
New home sales and consumer spending data in the United
States came in below expectations, prompting some interest in
the relative safety of government debt. Major North American
stock markets also cut earlier gains as well.
The two-year government bond <CA2YT=RR> rose 5 Canadian
cents to C$99.78 to yield 1.366 percent, while the 10-year bond
<CA10YT=RR> gained 13 Canadian cents to C$101.37 to yield 3.577
Canadian notes outperformed against U.S. bonds, with the
10-year yield spread widening to 17.8 basis points below its
U.S. counterpart from 16.6 basis points the previous session.
(Additional reporting by Jennifer Kwan; editing by Rob