Loonie stays above $1.06 US

The Canadian dollar rose to a 3½-year high in early trading Tuesday as investors continued to focus on the United States' debt deadlock.

The loonie was up more than half a cent to 106.24 cents US, its highest level since early November 2007. It fell back somewhat in the afternoon, and closed at 106.07 cents US, up .34 of a cent .

The U.S. dollar was broadly weaker, with most major currencies at or approaching all-time highs against the greenback as the political environment in Washington remained divided over the U.S. government's debt ceiling. 

'The market is losing patience with the debt ceiling negotiations ahead of the August 2 deadline' —Royal Bank

There are no major economic data releases scheduled out of Canada on Tuesday, so the loonie is expected to trade on "broad market sentiment," Scotia Capital said in a research note.

"The U.S. debt ceiling remains the markets' obsession," observed Adam Cole, global head of foreign-exchange strategy for RBC Capital Markets.

"The market is losing patience with the debt ceiling negotiations ahead of the August 2 deadline," RBC said in a research note.

U.S. President Barack Obama and House Speaker John Boehner's statements Monday night "were taken as indicating no progress has been made in reaching a compromise," Cole said.

World stock markets were mostly lower in the face of pessimism due to the U.S. debt impasse. The TSX was down almost 100 points to 13,351 at midday, and the major broad market New York indices were also lower.

Investors search for other safe havens pushed gold prices higher. The August bullion contract was up $2 to $1,614.20 an ounce at midday.

The Swiss franc and the Japanese yen are the only real alternative reserve currencies, and both were higher against their U.S. counterpart. The greenback hit an all-time low versus the Swiss franc of 0.7996 francs in the minutes after Obama and Boehner addressed Americans on television Monday night.