Originally published September 14, 2007 at 12:00 AM | Page modified September 14, 2007 at 2:06 AM
Canadian dollar leaps to 30-year high
The Canadian dollar shot to a 30-year high versus the U.S. currency Thursday as commodity prices remained at lofty levels, while the greenback...
Reuters and The Associated Press
The Canadian dollar shot to a 30-year high versus the U.S. currency Thursday as commodity prices remained at lofty levels, while the greenback could not shake off expectations for a U.S. interest-rate cut next week.
Rising as high as 97 U.S. cents, the loonie, the name for the Canadian $1 coin with a loon on the back, dropped back to 96.90 U.S. cents in late New York trading. It bought 96.50 U.S. cents late Wednesday.
Much of the Canadian dollar's recent string of gains has been attributed to U.S. dollar weakness since last week's U.S. jobs report unexpectedly fell well short of estimates.
Commodity prices have also played a key role, especially the rise in oil prices to record levels above $80 a barrel and gold prices sitting comfortably above $700 an ounce.
"The catalyst here really is kind of the broad environment of [U.S.] dollar weakness that has been in place since last Friday's August nonfarm jobs report," said David Powell, currency analyst at IDEAglobal in New York.
"And also we're seeing some independent Canadian dollar strength as oil prices remain elevated."
The weak data south of the border have the market fully expecting the Federal Reserve to cut its key interest rate next week from the current 5.25 percent level.
Such a move would narrow the Canada-U.S. rate gap in favor of the Canadian currency as the Bank of Canada is expected to leave its key rate steady at 4.50 percent when it next sets policy Oct. 16.
The Canadian dollar's latest rise reignited chatter of the currency reaching parity with the greenback, a level it has not been at since November 1976.
Meanwhile, the dollar hovered near a record low Thursday against the euro. The euro rose to $1.3927, topping the record $1.3914 reached the previous day, before settling back to $1.3886 in late New York trading. It bought $1.3908 late Wednesday.
Some point to the potential dangers of a strong euro to the economies of countries that use the currency — including Germany, the world's largest exporter.
"In this situation, everything that has a disadvantageous effect on exports is a problem, and the rising euro is part of that," Peter Bofinger, a member of the German government's independent economic-advisory panel, was quoted as telling the daily Berliner Zeitung.
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"If the rate climbs further, politicians should think about supportive buying in favor of the dollar," he added, according to the report.
Howard Archer, the chief U.K. and European economist at Global Insight, said the record euro is not all bad news for European firms.
"Euro-zone consumers could benefit from cheaper prices for some imported goods. There is also some good news for euro-zone companies," he said. "Given that oil, metals and many raw-material prices are typically quoted in dollars, the strength of the euro against the dollar should dampen firms' input costs."
Copyright © 2007 The Seattle Times Company
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