Loonie makes gains on greenback
TORONTO The loonie broke above US 80 cents Monday for the first time in more than a year amid a weakened U.S. dollar and further signs of a strengthening Canadian economy.
After steadily rising for weeks, the Canadian dollar crested above the threshold in morning trading and was bobbing around that level about an hour before markets were to close at 4 p.m. ET. As of 4:48 p.m., it was trading at US 79.92 cents.
The currency has gained nearly 10 per cent since early May, fuelled by brightening economic prospects in recent months that prompted the Bank of Canada to raise its key benchmark interest rate earlier this month for the first time in close to seven years. The dollar hasn’t closed above 80 cents since June 30, 2015.
There’s a 79-per-cent probability that policy makers led by governor Stephen Poloz will increase rates again this year, according to overnight index swaps data compiled by Bloomberg.
Earlier Monday, Statistics Canada reported that wholesale sales hit a record high in May as they climbed 0.9 per cent to $61.6 billion. Economists had expected an increase of 0.5 per cent, according to Thomson Reuters.
Isaac Holloway, an assistant professor at the Ivey Business School at Western University, said the gain in the Canadian dollar will have the biggest effect on importers and exporters, though it will likely be months before consumers see the fallout. “Anyone importing or consuming imported goods could be seeing relief on the price front,” he said. “On the flip side, anybody who is exporting is going to have to lower their prices to remain competitive with foreign competitors.”
A stronger loonie will also likely entice more Canadians to travel to the U.S., he added.