Loonie closes above $1.07 US on strong job growth
The Canadian dollar gained almost two fullcents against the U.S. greenback Friday following the release of a surprisingly strongjobs report in Canada.
Theloonie closed the trading day at$1.0704 US, up 1.92 cents from Thursday. It went as high as $1.0730 US during the day, according to Bank of Canada data.
It's now at itshighest level against the U.S dollar since the Canadian currency was allowed tofloat in 1950.
'We would not be surprised at all to see [the dollar] back at parity within a few weeks.' —Gavin Graham, Guardian Group of Funds
The Canadian economy added 63,000 jobs in October, pushing the jobless rate down 0.1 of a percentage point to 5.8 per cent — a 33-year low.
U.S. job growth was also much stronger than expected in October, adding 166,000 jobs when about 80,000 additions had been expected.
A weakening U.S. dollar, a cut in U.S. interest rates, economic concerns south of the border, strong oil prices and a healthy Canadian economy have all combined to push the loonie sharply higher.
The loonie hit parity with the U.S. dollar on Sept. 20 — a first in 30 years. Earlier this week, the Canadian dollar surpassed its previous post-war high of $1.0614 US,set in August 1957.
So far this year, the dollar has gained 24 per cent against the U.S. greenback, making it the best performer among the 16 most actively traded currencies, Bloomberg reported.
$1.10 US coming?
The speed of the dollar's ascenthas forcedeconomists to repeatedlyrevisetheir forecasts of just how high the loonie might fly. Many now see $1.10 USas a realistic near-term target.
"Crude oil could surely push the loonie up to $1.10 US in the near term, but not on a sustainable basis,"TD Bank economist Pascal Gauthier wrote in a report Friday.
Gavin Graham, chief investment officer at Guardian Group of Funds, agreed that the loonie won't stay at these heights, especially after Friday's huge gain.
"We would not be surprised at all to seeit back at parity within a few weeks, because what [a two-cent rise in one day] means is everybody and their grandmother is now long the Canadian dollar and short the U.S. dollar, and that only ends one way: with a big reversal," he told CBC News.
Speaking to reporters in Halifax, Prime Minister Stephen Harper said hedoesn't comment on the value of the dollar.
"That is the responsibility of the Bank of Canada," he said.
Harper added the government has a lot of confidence in Canada's economy, but acknowledged the high dollar presents it with "some difficulties as well as some advantages."
'No quick fix': Flaherty
Some critics have urged the federal government to signal the Bank of Canada to lower interest rates to bring down the soaring dollar and ease the pressure on exporters.
But Finance Minister Jim Flaherty told a business group in Torontoit would be "a mistake for anyone to think there is a quick fix to this." He alsodeclined to comment oncentral bank policy.
Sears Canada andRexall Drug Stores on Friday joined a growing list of retailers lowering prices to reflect the high dollar. "Canadians expect us to give them lower prices in light of the dollar's value, and we are working to meet these expectations," said Sears Canada CEO Dene Rogers in a statement.
Wal-Mart, Zellers, the Bay and Indigo Books and Music have also slashed pricesrecently.Some car companies havelowered sticker prices or boosted incentives to keep customers from crossing the border.