This article is from the 21 March 2011 edition of “Reuters Canada”.

The Canadian dollar rebounded on Monday from last week's sell-off against its U.S. counterpart as firm commodity prices and developments in strife-torn Libya and quake-stricken Japan bolstered the currency.

Oil, a key driver for the commodity-linked Canadian dollar, rose following a wave of U.N.-mandated airstrikes on Libya and as unrest in the Middle East fueled worries about the region's oil supply.

Concerns about a nuclear power station crisis in Japan eased somewhat, lifting market sentiment, while the yen extended losses amid wariness of more coordinated selling of the Japanese currency by the Group of Seven nations.

"We had a bit of a hiccup last week," said Steve Butler, director of foreign exchange trading at Scotia Capital.

"The market was a little concerned about the macro events going on and we saw a big sell-off in the Canadian dollar. Now we've basically recovered all of our lost ground from last week."

At 8:26 a.m., the currency stood at C$0.9764 to the U.S. dollar, or $1.0242, up from Friday's North American finish of C$0.9861 to the U.S. dollar, or $1.0141.

Given the currency's firm gains in quiet trade for most of the major currencies, Butler saw limited further gains, with resistance around the C$0.9710 range and support near C$0.9800.

"Now that things have settled down globally -- not that we're out of the woods by any stretch of the imagination ... it's help settle the markets a little bit," said Butler.

Retail sales data will provide more clues into how well the Canadian economy is faring and provide further direction for the Canadian dollar.

The federal budget report on Tuesday will also be in focus, but Butler doesn't expect any dramatic moves.

"The market may be a little bit unsettled if we do get that no-confidence vote, but I'm not sure the market will take it too hard given the relatively stable political environment of Canada," said Butler.

Canadian bond prices fell across the curve, in step with U.S. Treasury prices, which dipped as risk appetite improved over progress in Japan's nuclear crisis and hope that intervention in Libya could help ease tensions.

The interest rate-sensitive two-year bond was down 10.5 Canadian cents to yield 1.663 percent, while the 10-year bond slipped 16 Canadian cents to yield 3.19 percent.

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