Canada Afternoon: C$ Ends Up Sharply As Risk Aversion Recedes

TORONTO (Dow Jones)--The Canadian dollar ended sharply higher Thursday, as it and other cyclical or risk-sensitive currencies benefitted from a broad global move away from the U.S. dollar and a surge in previously timid risk appetites among investors. The U.S. dollar was trading at C$1.2420 at 3:49 p.m. EDT (1949 GMT), from C$1.2492 at 8:00 a.m. EDT (1200 GMT) and C$1.2607 late Wednesday. As it usually does, the Canadian dollar responded positively Thursday to a concerted rally on virtually all major global equity markets. The rally was chiefly if not exclusively driven by an upsurge of investor optimism that global policymakers may be getting the upper hand on the global economic crisis, after leaders of the G-20 nations meeting in London announced a series of measures that included major new funding for the International Monetary Fund and stepped up aid programs for developing countries. The buoyant mood also spilled over to boost commodity prices such as oil, which vaulted well over the $50-a-barrel mark and added additional impetus to the Canadian dollar's rally. The currency eventually rose to a new one-week high at C$1.2339, according to EBS before retreating somewhat. While the scope of its gains Thursday were impressive and have the potential to extend once again to the top of the currency's recent trading range in the C$1.2000 area, currency watchers caution that such one-day rallies have been seen numerous times in recent months, and can often reverse just as quickly if data or other events conspire to stoke global risk aversion again. The biggest near-term event risk for the