Forex - U.S. dollar hits 2-year highs vs. Canadian dollar

The U.S. dollar rose to two-year highs against the Canadian dollar on Monday, as demand for the greenback continued to be underpinned by expectations that the Federal Reserve will soon start tapering stimulus.

USD/CAD was up 0.22% to 1.0636 during early U.S. trade, near highs of 1.0654, the loftiest level since October 2011.

The pair is likely to find support at 1.0600 and resistance at 1.0675.

The greenback remained supported by the view that the Federal Reserve could start to unwind its USD85 billion-a-month asset purchase program before the end of the year.

Investors were looking ahead to Friday’s U.S. nonfarm payrolls report for November, for indications on the timing of a possible reduction in Fed stimulus.

The loonie, as the Canadian dollar is also known, shrugged off data on Friday showing that Canada’s economy grew 0.7% in the third quarter, following growth of 0.4% in the previous quarter. 

On a month-over-month basis, the Canadian economy grew 0.3% in September, above expectations for growth of 0.1%.

The Canadian dollar found some support as crude oil prices rebounded on Monday, with light sweet crude futures for delivery in January up 0.64% to USD93.36 a barrel on the New York Mercantile Exchange.

Crude oil is Canada’s largest export and the loonie is very sensitive to fluctuations in crude oil prices.

Elsewhere, the Canadian dollar was slightly higher against the euro, withEUR/CAD slipping 0.14% to 1.4407.

The Institute of Supply Management was to release a report on manufacturing activity in the U.S. later Monday.