Friday, September 21, 2007

We're even!

By Michael J.W. Stickings


Boosted by high commodity prices and a weakening U.S. dollar, the loonie reached parity with the greenback Thursday for the first time in nearly 31 years, promising to boost the energy and import sectors and give consumers cheaper vacations but spelling more trouble for Canada's industrial heartland.

The loonie, which has been gaining on its American counterpart since bottoming out below 62 cents in early 2002, has recently been on a spectacular run, up from 95 cents at the start of September and from under 90 cents last spring.

Soaring demand for Canadian commodities, ranging from oil and wheat to coal, potash, nickel and zinc – have helped propel the currency, while a weakening American economy has dragged down the greenback, the world's most widely held and traded currency.

At 10:58 a.m. EDT, the loonie first crossed the threshold to hit $1.0004, then eased back slightly to close at 99.87 cents (U.S.), up 1.37 cents from Wednesday.

The last time the dollar was at par with the greenback was Nov. 25, 1976, when Pierre Trudeau was prime minister and René Lévesque had just become premier of Quebec. That high point for the currency signalled the beginning of a long slide for the loonie, as national unity concerns and mounting worries about Canada's worsening government finances over the next decade or so scared away foreign buyers of the currency.

This is great news for those of us who travel to the U.S. and who buy U.S. goods, but, obviously, it's lousy news, lousy news getting lousier, for our industrial sector.

Still, it's a point of pride for us after decades of having our dollar -- and, in a way, us -- looked down upon and made fun of. We should not make too much of this -- currency trading is notoriously fickle -- but there's nothing wrong with feeling good about it.

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