“A strengthening currency has started to adversely affect the country’s growth, especially the manufacturing sector, which may raise concern the BOC needs to keep rates on hold.”
Canadian Dollar Reaches 30-Year High
Saturday, June 30, 2007
The Canadian Dollar is making a run at forex history, having reached a
30-year high against the USD this week. The currency has appreciated
by over 50% since 2002, and is up 9.4% this year alone. The Loonie is
surging on a combination of high commodity prices and attractive
interest rates. It is no coincidence that the price of oil has more
than tripled over the five year period that the Loonie also appreciated
in value. In addition, the Bank of Canada is expected to raise interest
rates two more times in the near-term which would bring its interest
rate levels close to parity with US rates. The last time the Canadian
currency, itself, stood at parity with the USD was in 1976. While it now
seems inevitable that the currency will soon return to that marker,
there are still hurdles that need to be cleared. Bloomberg News
reports:
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