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Loonie soars to 3-1/2-month high

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The Canadian dollar climbed to a three-and-a-half-month-high against the U.S. dollar on Tuesday, tracking global equities, commodities and other commodity-driven currencies higher as a stream of encouraging headlines lifted sentiment.

"I would say there isn't one catalyst but a slew of catalysts which have helped the risk rally," said Camilla Sutton, chief currency strategist at Scotiabank.

She cautioned however that near term, the currency's recent surge could be overdone.

"Anything we measure it against, all the fundamental drivers for CAD are positive for CAD which is good, however if we look at it on any of the charts, it's really overstepped its rally," added Sutton, noting correlations to oil and other commodities, and interest rate spreads.

At 8:19 a.m. ET, Canada's dollar was at $1.0141 US cents, firmer than Monday's North American session close at $1.0117.

The Canadian dollar hit an intraday high of $1.0150, its firmest level since May 3.

Sutton eyed the Canadian dollar's range for the day between $0.9840-$0.9890 CDN against the greenback.

Wednesday's Canadian retail sales data, comments from Bank of Canada's Mark Carney when he speaks to the Canadian Auto Workers union and the U.S. Federal Reserve's FOMC minutes could all be factors in the currency's direction. Market watchers will look closely for any change in the Canadian central bank's perceived tightening bias.

Fed Chairman Ben Bernanke's speech in Jackson Hole, Wyoming, on August 31 is seen as a major event. On the domestic front, all eyes will also be on the Bank of Canada policy decision and the Quebec election.

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