Loonie Energized: Canadian Dollar Achieving Parity With The US Dollar

This literally seems to be the case, with the Canadian dollar commonly called the Loonie achieving parity with the US dollar on the back of firming up of energy and crude prices. Canada has also benefited from the rising demand for commodities and metals like copper, gold, wheat and oil from the major emerging economies of India and China and the US. Canada is also the largest producer of uranium in the world and one of the largest exporters of natural gas.

Canada also has one of the largest pools of oil reserves after the Middle East. With crude futures crossing the $ 86 a barrel mark, the Loonie was energized briefly to parity with the US dollar. Though the Loonie has achieved this feat in the past as well, this time around its strength is expected to last longer than it did in the previous round. The Loonie achieved parity after July 2008 and dipped to 99.88 cents. The next day, the Loonie again flexed its muscles and moved up to 99.98 cents, suggesting that its strength may be here to stay for some time. The Loonie has gained nearly 5% this year after strengthening nearly 16% against the US dollar in 2009.

But, just what does this mean for Canadians and the Canadian economy in general? For Canadians planning a vacation trip to the US or buying property or stocks in US companies, their Loonie will give them a better bang for their buck as it can buy more US dollars than it could previously. A stronger Loonie also means that imports are going to be cheaper, which would help keep inflation in check, something that is a boon for the Canadian economy as it would not need to worry so much about jacking up interest rates immediately.

This will help the Canadian economy galvanize its wheels faster out of the recession, something that the US is not having so much luck with. The Canadian central bank governor had recently suggested his intent to raise interest rates by 25 basis points in June. However, if the Loonie continues with its strength and helps contain inflation, Canada may postpone increasing interest rates by another quarter. The recession battered property market in the US is also attracting investment from Canadians, who's stronger Loonie makes the proposition more attractive. Canadian companies are also planning to buy newer technologies, which have suddenly become cheaper due to the stronger Loonie, with the objective of improving productivity and adding a long term competitive advantage to their businesses. The strength of the Loonie is also a clear reflection of the strength of the Canadian economy vis-à-vis the other developed economies. It recovered the earliest from the economic slump from amongst all the G7 economies. Employment in Canada was marked by an addition of 26000 in March, which was a third consecutive monthly gain, suggestive of a fast recovery. The Canadian economy is expected to grow 3.1% in 2010 and probably grew by as much as 3.8% in the first quarter of the year. Thus all indicators point towards a strong Loonie for some time to come.

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Pete is a freelance article writer, expert link builder, article marketing expert, and a seo specialist .

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