Loonie continues to climb, closes at 98.98 cents US
Analysts say the Canadian dollar, which rose beyond 99 cents US on Wednesday before receding slightly, will remain strong for months if not years.
The loonie is at its highest value against the greenback in 20 months. It closed up 0.36 of a cent Wednesday to 98.98 cents US.
Month by month, the loonie has been gaining ground against the greenback since March of last year. Analysts expect the trend will continue.
"There are a number of factors for this," BNN's Mark Bunting told CTV News Channel. "You've got currency traders around the world looking at our economy improving. They like what they see."
Experts say the loonie will break the one-dollar mark soon. And unlike in late 2007, when the Canadian dollar jumped above parity before retreating by July 2008, there is little evidence to suggest it will drop this time.
David Watt, a currency strategist with Royal Bank, said he thinks the loonie will likely hover near parity for at least the next two years.
"We've taken to calling parity the new normal for the Canadian dollar," Watt said. "Before, whenever there was a crisis anywhere in the world, the Canadian dollar rushed to the front in terms of getting beaten up. But now you get more talk of Canada as a safe haven."
Economists expect inflation numbers, which Statistics Canada will release Friday morning, to be in the 1.4 per cent range. That would normally push down the Canadian dollar.
But it won't in this case, according to TD deputy chief economist Craig Alexander.
The markets expect that inflation will be low in future and that the Bank of Canada will move before the U.S. Federal Reserve to raise interest rates, he said.
Additionally, Alexander told The Canadian Press that Canada's reputation as a resource-based economy will keep the loonie high.
Meanwhile, Industry Minister Tony Clement said that Canadian industries are learning to deal with having a stronger currency.
"Obviously, historically it's been an issue for Canada," he said. "What we're seeing is that Canadian manufacturers and other exporters are learning to live with the higher dollar."
"And they are increasing their labour-factor productivity, which is all good news," Prentice added.
On Tuesday, Statistics Canada reported that productivity rose 1.4 per cent during the last quarter of 2009. That represents the largest such increase in more than a decade.
The rising dollar can be a mixed blessing for Canadian businesses, pushing down the cost of imported supplies but forcing them to increase the price at which they sell finished goods in the United States and elsewhere.
NDP Leader Jack Layton said the strong dollar is "causing devastation" in Canada's manufacturing industries.
The president of one Toronto-based manufacturer said he was expecting the surging loonie to hurt his U.S. sales.
"It can be challenging because you're now competing at par with similar companies that are building doors right in people's backyards," said Colin Fraser of Amberwood Doors.
"Business from the U.S. will deteriorate somewhat," he said.
Canadian firms that export goods south of the border will have to get creative, Fraser added. His company plans to use more aggressive sales and marketing strategies.
With a report from CTV Toronto's Galit Solomon and files from The Canadian Press