The Canadian dollar rose on the speculations that the tax reductions in the United States, the biggest trading partner of Canada, will bolster the economic growth of the country.

Barack Obama, the President of the United States of America, ruled in favor of prolonging the reduction of taxes that were about to get increased on December 31, 2010. The government bonds of Canadian government declined 1.1 percent this month. The housing starts in Canada increased to 187,200 in the month of November 2010 (seasonally adjusted) from 167,800 in the month of October 2010. The median forecast was 174,000.

USD/CAD went down from 1.0123 to 1.0111 as of 17:54 GMT after it reached the intraday low of 1.0063 and is presently on an improving spree. EUR/CAD dropped from 1.3424 to 1.3362, following the decline to 1.3340.

Market experts are of the view that tax reductions in the US may not be enough for the Canadian economy as the economy is likely to be affected by the continuing debt crisis of members of the European Union and the ongoing tensions between North and South Korea that have negatively influenced the economic growth of the world nations and the currencies related to them.

The Canadian dollar fell recently after the employment reports from Canada and the US were worse than predicted, decreasing demand for the Canadian currency. The currency of Canada appeared to be primarily influenced by the US nonfarm payrolls that rose only by 39,000 instead of expectations of 143,000.