TORONTO – The Canadian dollar had another winning day Monday, staying above 92 cents US and briefly cracking the highest level it has hit in nine months.
Increasing energy prices, particularly higher crude oil, have been a major driver of support for the dollar, which has gained about five per cent over the past two weeks.
“Generally speaking, the Canadian dollar has been very closely tied to how global stock markets have done since the crisis broke open last fall,”said BMO Capital Markets economist Doug Porter.
“Commodity prices have also gone hand-in-hand with that trend. We’ve seen a real turnaround in energy prices in the last couple of weeks, which has helped the currency turn course again.”
The loonie closed at 92.5 cents US, up 0.16 cents, but earlier in the day rose as high as 92.78 cents US, its highest level since last October.
The dollar has also benefited from solid economic data at home as well as weakness in the American dollar, Porter said, rising about five per cent over the past two weeks.
That has been more than could be expected, given the supporting fundamentals, he added.
Nevertheless, Porter said the dollar could move higher still, and while it may backtrack from time to time, the underlying trend is towards a stronger currency – possibly again hitting parity with the U.S. dollar by the end of next year.
“Generally we do think it will keep going higher,” Porter said.
“Whether it can do it without a break is a bit more of a debatable point. At some time the currency will pause for breath, but we certainly think parity is within is grasp.”
The bank is predicting the dollar could again hit parity no earlier than the end of next year, though he cautioned that is “really a lifetime away, from a financial market perspective.”
“But I think the main point is that we do believe the underlying trend will be towards a stronger currency over the next year and a half.”
The loonie was last at parity with the American dollar in May 2008. It rose to its all-time high of 110.31 cents US in November of 2007.
