Loonie cruises near 90 cents US [!-- END HEADLINE --] [div class="storyhdr"] CBC[/p] [div class="spacer"][/div][/div] The Canadian dollar continued its upward trajectory on Monday as market watchers suggested it is headed back to parity with the U.S dollar.[/p] [/p] The loonie finished at 89.83 cents US, up 0.38 of a cent from Friday's close.[/p] [/p] The Canadian dollar has been on a tear recently, rising from 86.01 cents US at the end of March to 89.26 cents US at the end of April.[/p] [/p] With the loonie approaching 90 cents US, some economists are now suggesting that a return to parity with the U.S. dollar is only a matter of time.[/p] [/p] National Bank Financial chief economist and strategist Clement Gignac said in a research report that the loonie could achieve parity by the autumn of 2007. The last time the Canadian and U.S. dollars were trading at the same level was 1976.[/p] [/p] Gignac noted that he had previously forecast parity between the two currencies by 2010.[/p] [/p] The next round of the Canadian dollar's rise is likely to be driven more by weakness in the U.S. dollar than by the rising price of oil, he said in the report issued Monday.[/p] [/p] The record current-account deficit in the U.S. and the increasing likelihood of foreign reserve diversification by Asian central banks are expected to drive a new drop in the U.S. dollar, he said.[/p] [/p] "It would be naive to assume that the currency of Canada, a country with both current-account and fiscal surpluses, will be untouched by a realignment of global exchange rates," he said.[/p] [/p] Gignac also sees the Bank of Canada allowing the loonie to rise as long as the Canadian economy continues to operate at or near its long-term capacity.[/p] [/p] The economist acknowledged that his forecast is not without risks. In the event of a sharp correction in commodity prices, or a hard landing for the U.S. economy, the Canadian dollar could lose steam, he said.[/p] [/p] Last week, Dennis Gartman, who writes the Gartman newsletter, also suggested parity is a possibility.[/p] [/p] "Why shouldn't Canada go to parity? It has what the world needs. It has water, it has oil, it has steel," Gartman told Bloomberg. "You name it, Canada has it."[/p]
