The loonie steadily rose on Wednesday, buoyed by a U.S.-led deal to take over a Canadian iron miner, and investors moving money out of flood-ravaged Australia.

The loonie was changing hands at 101.26 cents US on Wednesday, up 0.22 from the Bank of Canada's close on Tuesday afternoon. It had earlier been more than 0.5 of a cent higher. Canada's currency has gained for eight consecutive days, and now sits at a 2.5 year high against the benchmark U.S. greenback. Most telling is that it is not moving in large, volatile jumps, but rather slowly and steadily advancing to parity and beyond.

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The loonie has gained against the U.S. dollar for eight straight days. ((Canadian Press))

A main driver of the rally Wednesday was NYSE-listed Cliffs Natural Resources Inc. making a $4.9 billion move for TSX-listed Thompson Iron Mines Ltd.

In addition to that move being a vote of confidence in Canada's commodity-driven economy in general, the deal specifically lit a fire under the loonie, Camilla Sutton, chief currency strategist at Scotia Capital said. Because the payout will be in Canadian dollars, "it's likely there will be some Canadian dollar buying on the back of it but it's all guesswork when it comes to [mergers and acquisitions.]"

Higher commodity prices also supported the currency.

Oil prices added to two days of sharp increases on news a 1,300-kilometre trans-Alaska pipeline, which normally carries about 620,000 barrels a day, remained shut after a leak was discovered Saturday at a North Slope pump station. Oil production on the North Slope was cut by 95 per cent.

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Three-month performance chart for the loonie. ((CBC))

The February crude contract on the New York Mercantile Exchange added 70 cents to $91.81 US a barrel.

The loonie is not only outperforming the greenback — it was higher against 13 of the 16 most influential currencies in the world on Wednesday.

"If you like the commodity story with all the flooding problems in Australia, some of the hot money is moving out of Australia and in to Canada," BMO's foreign exchange director Blake Jesperson told Bloomberg News.

"The issues there are forcing investors to look elsewhere. We’re seeing good demand from reserve managers, central banks and large global institutions, all putting money into Canada."