Canadian dollar trades equal to US dollar


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Canadian dollar trades equal to US dollar
* The last time the two currencies were at par was in November 1976, the year Montreal hosted the Summer Olympics and Pierre Trudeau was prime minister

OTTAWA/TORONTO: The Canadian dollar hit parity with the US dollar for the first time in 31 years on Thursday and is expected to remain strong, delighting Canadians used to being mocked for their “northern peso.”

The loonie, so called because of the bird engraved on the one-dollar coin, capped a 62 percent rise from 2002 on the back of booming commodity prices and a deepening disenchantment with the greenback.

Canada, a major oil producer, is benefiting from record high oil prices and a China-led building boom that has boosted base metal prices.

The strong currency is seen as a huge threat to Canadian exporters and the parity benchmark adds to pressure on the Conservative government to help out manufacturers. Over 80 percent of Canada’s exports are sold to the United States.

The high currency helps manufacturers buy equipment but the suddenness of its rise has put pressure on them, he said. He also acknowledged people had lost jobs but said they were finding other good employment because of economic strength.

The resource boom has coincided with the US dollar’s own broad-based decline, following the collapse of the tech bubble in 2001 and the growing US budget and trade deficits, which contrast with Canada’s surpluses.

The final push to the key level for Canada on Thursday came as the greenback hit a record low against the euro.

The momentum for Canada also comes from the narrowing of the spread between US and Canadian interest rates after the US Federal Reserve cut the federal funds rate by 50 basis points this week to 4.75 percent, bringing it closer to the Bank of Canada’s 4.50 percent key rate.

The currency crept just above the US$1 level Thursday morning, and went as high as C$0.9992 to the US dollar, or US$1.0008, according to the Bank of Canada. The currency finished the session at C$1.0013 to the US dollar, or 99.87 US cents.

The last time the two currencies were at par was in November 1976, the year Montreal hosted the Summer Olympics and Pierre Trudeau was prime minister.

Dealers expect the loonie to continue to stay near par or above that, but were divided over just how high it will go and how long the rally will last.

The Canadian currency’s climb from a low of 61.75 US cents in 2002 has been embraced by a country that often feels itself in the economic and cultural shadow of its more powerful southern neighbor.

Daily Times - Leading News Resource of Pakistan

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