The loonie continued its charge toward parity with the U.S. dollar Monday, closing 0.55 of a cent higher at 99.72 cents US.
The move towards the U.S. dollar is no surprise for the loonie, which came within one penny of parity on St. Patrick's Day last month. The last time it was even with the U.S. dollar was in July 2008.
"We're one good number away from seeing the Canadian dollar through parity," CIBC chief economist Avery Shenfeld said Monday.
The U.S. dollar has fallen in value in recent weeks as oil prices have increased amid continued instability in the American economy.
In Canada, the dollar has surged as the price of commodities has increased, a trend that is expected to persist for some time, BNN's Mark Bunting said Monday afternoon.
"One of them is the fact that crude oil, which is our biggest export, has broken out of a trading range that it's been in for a long time," Bunting told Â鶹´«Ã½ Channel. "It's sitting at 17-month high as investors think there's going to be more demand for crude oil globally as the economic recovery continues."
The loonie has also benefited from the fact that Canada is not struggling with its debt the way that the U.S. and other European countries are.
Bunting said investors will continue to look favourably on Canada for a number of reasons, including data coming out Friday that is expected to show that jobs have been added for the third straight month. He also pointed out that investors will be watching for the Bank of Canada to raise interest rates this spring ahead of the U.S. Federal Reserve.
All of which means "investors around the world see Canada as a very sound place to be because in a comparative sense we're looking pretty good, economically speaking," Bunting said.
While Canadians may appreciate the cross-border shopping bargains that a higher dollar may bring them, a higher loonie isn't a boon for every part of the Canadian economy.
Manufacturers, in particular, suffer with a higher Canadian dollar in play, as it makes their exports more expensive, especially in their biggest export market directly south of the border.
The forestry industry is another part of the economy that will suffer if the dollar reaches parity, said Avrim Lazar of the Forest Products Association of Canada. And such an outcome will hamper the ability of his industry to pull out of the recession.
"The government and the bank (Bank of Canada) feeling complacent about a high dollar would be a serious error (because) we export most of our non-government GDP to the U.S.," Lazar said.
"People are reassured about all the good numbers, but all those good numbers were before the dollar started spiking."
With files from The Canadian Press
