* C$ ends at $0.9895 vs US$ or US$1.0106
* Highest close since Sept. 16
* ECB bank loans boost sentiment
* Bond prices mostly lower
By Jon Cook
TORONTO, Feb 29 The Canadian dollar rose
to its highest level in more than five months against the U.S.
currency on Wednesday, boosted by a massive euro-zone liquidity
injection by the European Central Bank and favorable month-end
purchases by institutional investors.
Around 800 banks took 530 billion euros ($708.98 billion) at
the ECB's second offering of three-year funding, essentially in
line with market expectations, driving demand for higher
yielding currencies at the expense of the euro.
"It should be bearish for the euro because it is a form of
quantitative easing," said Jack Spitz, managing director of
foreign exchange trading at National Bank Financial.
Quantitative easing is essentially the creation of new money
by central banks to help stimulate economic growth.
"The move to buy the Canadian dollar was predominantly on
the back of asset managers rebalancing hedge flows in addition
to the ECB," Spitz said.
On Wednesday, the euro fell 1.6 percent against
the Canadian dollar, its biggest single-day drop in nearly 10
The Canadian dollar finished the at C$0.9895 versus
the greenback, or US$1.0106, up from Tuesday's North American
session finish of C$0.9954, or $1.0046. It was its highest close
since Sept. 16.
Spitz said most of the Canadian dollar's gain came after the
currency breached last week's high of C$0.9907, but that he
expected resistance around the C$0.9905 level to develop in the
The currency jumped as high as C$0.9844, or $1.0166, before
retreating after U.S. Federal Reserve Chairman Ben Bernanke
offered only a tempered view of the U.S. economy.
Gold prices fell 3 percent as the U.S. dollar rallied after
Bernanke said the decline in the U.S. unemployment rate has
"Some of Canada's gains have been offset by weakness being
seen in certain markets - gold is down quite dramatically
today," Spitz said.
Canadian bond prices were mostly lower, with the two-year
bond down 5 Canadian cents to yield 1.098 percent.
The 10-year bond fell 12 Canadian cents to yield