Friday, October 05, 2007

We're way more than even!

By Michael J.W. Stickings

We've been (gleefully) following the rise of the Canadian dollar in recent weeks, up and up and up, surpassing even many of our more optimistic expectations. First it reached partity with the U.S. dollar, then, at long last, it closed above parity for the first time in almost 31 years. I don't have much to add here by way of analysis (see my previous two posts, linked above) -- it still feels awfully good, but one continues to worry about the overall health of our export and tourism sectors -- but here's an update:

The Canadian dollar defied gravity Friday, rising above $1.02 (U.S.) at one point, as the high-flying currency got additional lift from a report showing Canada's unemployment rate fell last month to the lowest level in 33 years.

It was a day of astonishing news for the Canadian economy, which had been expected to start feeling the pain from the summer subprime mortgage crisis in the United States that many thought would send shock waves rippling into in this country.

Statistics Canada reported early Friday that the jobless rate had tumbled to 5.9 per cent in September and that the economy churned out an additional 51,100 new jobs during the month over August.

It was the first time the unemployment rate had been below six per cent since November 1974, when Pierre Trudeau was the prime minister, Canada had not yet repatriated the Constitution and disco music was just beginning to catch fire.

The loonie jumped to 101.4 at the opening of trading, up 1.14 cents from Thursday's close. And it kept rising, at one time lifting above 102.19 cents US, a level that hasn't been surpassed since November 1976.

The loonie closed the trading day in Toronto up 1.59 cents to 101.85 (U.S.).

I read somewhere today that some analysts are predicting our dollar could go as high as $1.10 U.S. Which would be, well, pretty amazing, given where it was just a few years ago. And with a strong economy, low jobless numbers, and high oil prices, we might just get there.

Which would be great for those of us who travel to the U.S. or otherwise buy U.S. goods but very bad for those of us who need a weaker dollar to remain competitive. A strong dollar, ironically, could end up bringing much of our economy back down from its current heights.

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