The Vancouver Sun reports in its Saturday edition the relatively strong Canadian dollar, now 93.14 U.S. cents, has been a surprise to many economists. A Canadian Press dispatch to The Sun says a combination of several factors has the dollar at least three cents higher than most forecasts for the year.
Among the factors driving the loonie higher: a revised view of Canadian inflation trends, a weaker American economy and currency, and a strong demand and prices for Canadian resources, particularly oil.
Mark Chandler, head of foreign exchange strategy at RBC, considers a weak U.S. currency as the leading factor for the loonie's relative strength but said it is also getting a boost from recent Bank of Canada comments that suggest there is virtually no chance that short-term interest rates will fall.
BMO economist Sal Guatieri said Canada has had one of the strongest currencies since the spring, fuelled by foreign demand for the country's relatively high short-term interest rates compared with those available in the United States, Europe and Japan.
"A lot of global capital is seeking higher rates of return, so we're seeing some of that money parked in the Canadian money market," Mr. Guatieri said.
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