If this could happen, I’m beginning to think that it isn’t beyond the hopes of we mere mortals to hope for a wee bit of Irish gold.
Loonie catches greenback
The Canadian dollar has broken through parity for the first time since Nov. 25, 1976.
The first official trade at parity took place at 10:58 a.m.
“Strong currency. Proud currency,” said Stephen Butler, director of foreign-exchange trading at Scotia Capital Inc., who said he's seen a slew of buyers from corporations to speculators, today. “All the fundamentals point to Canada right now.”
A cheer went up in currency trading rooms across the country on Thursday, but the loonie's astonishing appreciation carries mixed blessings. It's a lot more affordable nowadays to travel abroad and to buy some imported goods, such as clothing. On the flip side, exporters are left scrambling to cope with the sheer speed of the rise.
The currency's 60-per-cent surge over the past five years “represents its most rapid climb on record,” said Jeff Rubin, chief economist for CIBC World Market.
It's a sweet vindication from some who predicted the move. Last year, National Bank of Canada said the currency would hit par by the fall of 2007.
“It would appear that we could miss our forecast made back in April 2006 ... by a couple of days,” quipped Stéfane Marion, economist at National Bank.
He figures that the surge of the dollar combined with rising borrowing costs for businesses “are equivalent to more than 150 basis points of tightening in monetary conditions since the start of the month.”
Thus he's calling on the Bank of Canada to lower interest rates at its next meeting on October 16.
The loonie since retreated from the $1 mark, trading recently at 99.90 cents (U.S.). The highest the currency has reached so far today was $1.0002.
The Canadian dollar has seen some steep ebbs and flows in its history. In 1864, the greenback traded at less than 36 cents (Canadian), an all-time low for the U.S. currency. In 2002, by contrast, the loonie traded as low as 62 cents.
Since then, rising commodity prices, a strong economy and buckling U.S. dollar have sent the loonie into orbit.
On Thursday, the loonie jumped more than a penny as investors continued to shun the American dollar, which sank to a record low against the euro. Gold prices are trading at a 27-year high while oil is near a record.
This year alone, the Canadian dollar has soared 16 per cent against the greenback, the strongest performance of any G-10 country.
The U.S. dollar meanwhile fell to a new low against the euro on Thursday as the European currency breached $1.40 for the first time since its debut in 1999.
Breaking the $1.40 barrier for the euro has long been seen as a key turning point in solidifying the euro's position in global currency markets, providing more impetus for it to be the reserve currency of choice — a position long held by the now-weakening U.S. dollar.
The greenback also fell against other currencies, dipping against the British pound to $2.0082 compared with $2.0025 late Wednesday. It also slipped against the Japanese currency to 114.96 yen from 116.09 late Wednesday.
“We expect more U.S. dollar weakness is looming,” Bank of Nova Scotia said in a report.