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article imageCanadian Loonie rises above U.S. dollar, contracts back to parity

By Andrew Moran     Oct 14, 2010 in Business
Toronto - In the early morning trading session, the Canadian loonie rose as high as 1.0014 cents U.S. before contracting to 99.67 cents U.S. and it's expected the Canadian dollar will remain at parity as the U.S. dollar devalues.
For the first time since April, the Canadian dollar is trading at or above parity with the U.S. dollar because of the rise in commodities and stocks and new home prices rose by 0.1 percent in August.
When the trading session opened on Thursday, the loonie rose 0.56 of a cent to 1.0008 cents U.S. and as of 11:58 a.m., one Canadian dollar buys 0.9958 cents U.S., according to 680 News. The weakness of the U.S. economic stimulus by the Federal Reserve is also a contributing factor to the decline in the U.S. dollar.
The loonie is the best performer among the top 16 traded currencies with the U.S. dollar. Canadian Finance Minister Jim Flaherty said Canada will be the first G7 country to balance its budget by the year 2015 – right now Canada maintains a budget deficit of $56 billion.
End of the road for the Benjamin
End of the road for the Benjamin
“Commodity currencies have been the real outperformers at the expense of the European currencies,” said executive director at CIBC World Markets unit, Shane Enright, in an interview with Bloomberg News. “The equity backdrop doesn’t hurt either.”
Analysts expect the Federal Reserve to initiate further stimulus in the hopes that the economy will grow; however, this will debase the currency even more. Meanwhile, the loonie is up 2.5 percent within the past month versus the U.S. dollar.
It’s expected that the Bank of Canada will not increase interest rates at its Oct. 19 policy announcement. The Canadian economy continues to lag as employers cut 6,600 jobs in September, reports The Canadian Press.. A higher loonie means exports to the U.S. will cost more, but importing will be cheaper.
Financial experts foresee new lows in U.S. dollar-Canada dollar in the shot-term.
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