Tue Sep 18 2007
The Canadian loonie's strong flight continued Tuesday as it closed above 98 cents US for the first time since Jan. 25, 1977. The dollar gained 1.36 cents over Mondays's close to close at 98.64 cents US.
The loonie's big move was helped along by the Federal Reserve's unexpectedly large cut in a key interest rate Tuesday afternoon.
The rate cut left the U.S. federal funds rate at 4.75 per cent, while the counterpart rate in Canada remains at 4.50 per cent. That dramatically narrowed the spread between the two rates and made Canadian dollars a lot more attractive.
The rate of $ 1 US to $ 1.01 CND at banks across Canada has made holidaying in Canada by American tourists that much less attractive, but the opposite is true too, as Canadians get more bang for their buck.
Talk of "whether" the dollar would hit parity with the U.S. currency seemed to be supplanted by talk of "when" it would reach that milestone.
The Canadian dollar's rise against the U.S. greenback has been stunning — up 14 per cent so far this year and up about 60 per cent since early 2002.
That's when the commodity price boom began to exert its loonie-positive effect as the price of many resource products that Canada exports in abundance began to climb — with oil being a notably strong performer.
The loonie ( as the Canadian dollar is called in Canada, the $ 2 coin is called the TOONIE, we no longer have a $ 2 bill) is widely seen as a "petro currency," meaning it is closely tied to the rise and fall of oil markets. The price of oil was hitting more new highs on Tuesday, rising 94 cents to close at $81.51 US a barrel.
The rising strength of the Canadian dollar is making life even more difficult for Canadian companies that export to the U.S. That includes many manufacturing companies and forestry companies.
CANADIAN DOLLAR almost on par to US DOLLAR
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