The US Dollar is playing a game of "how low can you go". Not great for Canadian exporters. Not bad for Canadian shoppers.
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The Canadian dollar is at its highest level in a year, and closing in on 3 cents above parity with the U.S. currency.
Several factors are playing into the strength of the loonie today, notably the Bank of Canada's signal that its next move, when it comes, will be a hike in interest rates, and expectations of another round of stimulus from the Federal Reserve.
Markets expect the U.S. central bank to announce another round of quantitative easing - dubbed QE3 - as early as this week. Speculation is generally holding down the U.S. dollar, said senior currency strategist Camilla Sutton of Bank of Nova Scotia. Having said that, the U.S. currency is up slightly today.
"With the BoC maintaining a hawkish tone last week and the Fed expected to launch another round of QE this week, the combined impact is bullish [Canadian dollar]," Ms. Sutton said.
Given that this week is packed with events - the Fed announces its decision Thursday - the dollar could hit $1.03 this week, she added.