The Canadian dollar retreated against its U.S. counterpart after reaching its highest level since June 2008 today, but remains near the parity level, supported by the speculation that the Bank of Canada will increase the interest rates faster than the Federal Reserve.
The analysts predict that the Bank of Canada will increase the benchmark overnight rate to 1.25 percent by the end of the year, while the U.S. Federal Reserve will increase its benchmark rate to 0.75 percent, from the current level of 0–0.25 percent, by that time. Jim Flaherty, the Canada’s Minister of Finance, said that the Canadian exporters have become more competitive and can handle a stronger currency. The International Monetary Fund forecast today that the Canadaâs economy will grow 3.1 percent in 2010 and 3.2 percent in the following year.
The experts think that the Loonie will stay near its current level. But some analysts believe that, despite the favorable fundamentals, the bullish trend was exaggerated and the currency’s appreciation was too large and too fast.
USD/CAD traded near 0.9993 as of 20:47 GMT today after it opened at 0.9985. EUR/CAD traded at about 1.3383 down from its opening rate of 1.3414.
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