Apr 2010 13

Canadian Dollar Hits Parity

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Canadian dollar by Nayu Kim Canadian dollar by Nayu Kim

The Canadian dollar, which (as a result of the crisis) weakened during the period of 2007 to 2009 against the U.S. dollar to a level of 1.3000 CAD / USD, now progressively strengthened and successfully reached parity with its U.S. counterpart. The last time the loonie traded with the U.S. dollar at the same level was on the 22nd of July 2008. Lately, the rising prices of oil were the main factor of reaching parity. Yesterday, the Canadian currency traded at C$1.0026 per U.S. dollar at 4:25 p.m. in Toronto, compared with C$1.0027 on April 9.

The development of the Canadian dollar reflects, in addition to the impact of oil, a mixture of positive signs when the economy is recovering more quickly to the market estimates as well as reducing the budget deficit and rising commodity prices. Canada, the largest U.S. trading partner, benefits from the rising demand for copper, gold or oil from the U.S. and emerging economies led by India and China.

The Bank of Canada Governor Mark Carney signaled that the bank is ready to raise interest rates from a record low of 0.25 percent in the first meeting of the Council on June 1st if inflation and growth outperform the estimates. According to the data from the Statistical Office from the end of March, the country?s economy grew by 0.6% in January, which is well above the January estimate and the fastest growth in three years.

Canada will also be the first of the G7, which almost erases the budget deficit. In March, the Finance minister Jim Flaherty presented a plan to lower the deficit from the current 53.8 billion CAD (2009) to only 1.8 billion CAD in 2014.

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