High Canadian dollar here to stay, economists say - Metro US

High Canadian dollar here to stay, economists say

OTTAWA – The high Canadian dollar appears to be here to stay despite what the Bank of Canada or inflation do to impact the currency.

Economists say the loonie, which jumped past 99 cents US on Wednesday, could hit parity at any time.

And unlike two years ago when the currency fell off the parity perch against the U.S. greenback as quickly as it had climbed, this time there will be no sudden retreat.

Under normal circumstances, Friday’s inflation numbers should provide a downward draft to the loonie’s flight.

The consensus of economists is for inflation, which hit 1.9 per cent in January, to fall all the way back to 1.4 per cent in February’s data.

That won’t matter, however, says TD deputy chief economist Craig Alexander.

He says the markets have already priced in that inflation will be low going forward, as they have that the Bank of Canada will likely move well before the U.S. Federal Reserve in raising interests rates.

Whether the loonie is slightly below parity, at parity or a little above, Alexander says the key point is that Canadians should expect the currency to remain strong for some time.

Also pushing up the currency is the perception that Canada’s resources-based economy will continue to benefit from high oil and mineral prices.

On Wednesday, world oil prices rose to US$82.80 a barrel, a gain of $1.10.

Industry Minister Tony Clement said Canadian businesses are learning to live with the new reality.

“Obviously, historically it’s been an issue for Canada,” he said of the negative impact of a strong currency on industry.

“What we’re seeing,” he added, “is that Canadian manufacturers and other exporters are learning to live with the higher dollar.”

By Wednesday afternoon, the loonie traded at 99.25 cents US, up .63 of a cent.

More from our Sister Sites