Breaking: Dollar rises on news Russian central bank to invest foreign reserves in loonie

By Daniel at 25 November, 2009, 8:02 pm

TORONTO - The Canadian dollar shot closer to parity with the U.S. dollar on Wednesday after the Russian central bank said it is preparing to invest in the loonie and diversify away from the American greenback.

The Russian central said it plans to invest some of its foreign exchange reserves in Canada’s currency to diversify its portfolio and reduce dependence on the U.S. dollar.

The Canadian dollar rose to its highest level in a week, reaching an intraday high around noon at $95.69.

Meanwhile, the U.S. dollar slid to a 15-month low against the euro and to its weakest level against the yen since January.

Coinciding with the American dollar’s weakness, the gold sector headed higher into record territory, up $12.60 to US$1,178.40 an ounce.

A Canadian market that has fared better than many during the recession, and a sluggish U.S. economy, make Canada an ideal investment for banks looking to diversify their investments away from U.S. dollar reserves, the staple reserve currency in most countries, said Steven Butler, director of foreign exchange at Scotia Capital.

Russia’s is not the first central bank to diversify into the Canadian dollar, there has also been interest in Latin America and Asia, he added.

“The Canadian economy has weathered the storm much better than a lot of other countries and Canada seems like a pretty logical place to diversify, especially the way the commodities have been climbing higher and the way the Canadian dollar has weathered the storm.”

The size of investment in the loonie has not been confirmed.

http://ca.news.finance.yahoo.com/s/25112009/2/biz-finance-dollar-rises-news-russian-central-bank-invest-foreign.html