Loonie takes flight; parity with U.S. dollar ‘new normal’
Posted Mar 18, 2010 05:47:27 AM.
This article is more than 5 years old.
The Canadian dollar is getting closer to an equal standing with its cousin south of the border.
The loonie reached a mid-afternoon high of 99.26 cents U.S., before it closed just shy of 99 cents, Wednesday. It’s the closest the loonie has been to parity with the greenback in nearly two years.
Rather than the result of a freefalling U.S. dollar, it seems this time the loonie is flapping its wings, fuelled by a strong economic recovery.
Helping the dollar along was some good economic news from Statistics Canada and a strong rise in wholesale sales.
Benjamin Reitzes, an economist with BMO Capital Markets says it’s just the latest bit of data pointing to a stronger economic recovery in Canada.
“Canadian data of late has been very strong,” Reitzes said. “(The) manufacturing report was strong a couple of days ago, and now wholesale trade is strong.”
A high dollar is typically seen as good for Canadians looking to head south — but not so much for manufacturing. However this time, there are signs that business is adjusting to its new reality.
“What we’re seeing, and the statistics bear this out now, is that in fact our Canadian manufacturers…are learning to live with a higher dollar,” said Tony Clement, industry minister.
Parity with the U.S. dollar, or close to it, is expected to last.
“We’ve actually sort of taken to calling parity…the ‘new normal,’ for the Canadian dollar,” said David Watt, senior currency analyst for the Royal Bank.
Economists expect the loonie to stay high even if the latest inflation figures are low on Friday, which would ease pressure from the Bank of Canada to raise interest rates later this summer.
