The Canadian dollar is continuing to reverse the gains it made in the first week of 2010 against the dollar. The Canadian dollar rose from a low of 1.0576 on December 30 to a high of 1.0249 yesterday at 3 a.m. London time on rising stock and oil prices and prospects of a worldwide economic recovery.

In early New York trading, the Canadian dollar began reversing gains earned after the China trade report that came out during the Asian session. It continued the reversal as February crude oil futures dropped from a Monday high of $83.80 to close at $82.10. The Canadian dollar dropped against the US dollar yesterday even as the dollar traded lower against a weighted basket of foreign currencies.

Stocks and oil prices fell this morning in New York on worries about the economic outlook following worse than expected results from Alcoa’s latest quarterly earnings report. Oil traders are also waiting for the inventory report, scheduled to be released at 10:30 a.m. ET tomorrow.

The US and Canada both reported trade numbers at 8:30 a.m. in New York. The United States reported a widening trade deficit while Canada reported an unexpected trade deficit.

The Dollar Index continues to drop against a weighted basket of foreign currencies while the Canadian dollar continues to lose against the US dollar. The Canadian dollar traded as low 1.04016 in the New York morning session, before pairing losses to trade at 1.0359 at 11 am New York time.