The Canadian dollar jumped more than a U.S. cent Monday with traders willing to take on more risk amid hopes for a resolution of the European debt crisis.
The loonie closed well off early highs as commodity prices moderated slightly and ended the session up 1.29 cents (U.S.) at 96.58 cents after running as high as 97.05 cents.
The January crude contract on the New York Mercantile Exchange jumped $1.44 to $98.21 a barrel.
Investor confidence also got a big boost from signs of a strong start to the U.S. holiday retail season, otherwise known as Black Friday. Americans' willingness to open their wallets has eased concerns that the world's largest economy will slide back into recession.
Meanwhile, investors are clearly hoping that recent signs of deterioration in the debt crisis will finally get Europe's leaders to agree on a package of measures that can ease market concerns over whether the euro itself can survive.
Markets were particularly disappointed during the previous week at the technical failure of a German bond auction.
And borrowing rates for Italy hit the 7 per cent level for the country's 10-year bonds last week, a level which is considered to be unsustainable.
On Monday, The Associated Press reported that under a new proposal, the 17-country euro zone will use the European Financial Stability Facility to insure the bonds of troubled countries within the bloc.
According to draft guidelines obtained by the news agency, bonds being issued in the future would receive fixed credit protection equal to 20 to 30 per cent. The actual rate will be determined "in light of market circumstances."
Analysts also pointed to a weekend report from Reuters that France and Germany were working on a much faster way towards euro zone fiscal integration.
Such a plan would start off with a core zone of eight to 10 countries instead of involving all 27 EU countries.
The loonie also found support from higher metal prices as the December copper contract in New York gained 9 cents to $3.36 a pound. And the December gold contract climbed $25.10 to $1,710.80 an ounce.