Loonie hits highest level since recession

The Canadian dollar jumped to a new 3-1/2 year high on Thursday, tearing through an April peak, amid expectations for higher interest rates in Canada and burgeoning foreign interest in Canadian assets.

The loonie reached US1.06.13¢, surpassing the April peak of US105.98¢ to its highest level since November, 2007 when it was at US105.99¢. It had closed on Wednesday at US1.056¢.

The loonie may have also been boosted by an EU summit draft proposals which made reference to extending European Financial Stability Facility loans and allowing the rescue fund to intervene on a precautionary basis. The draft proposal gave the euro a lift against the U.S. dollar and helped send Italian bond yields lower.

“Governor Carney has made a slight shift in tone to slightly hawkish tone which is positive for the Canadian dollar because higher interest rates in Canada tend to be positive for currency,” said Camilla Sutton, Chief Currency Strategist, Scotia Capital.

“Secondly we have a generally weak U.S. Dollar over the year – and what we have for Canada is a small, open economy which is a good diversification vehicle for those not wanting European or U.S. exposure.”