Loonie soars 8 cents in May, finance minister concerned
Last Updated: Friday, May 29, 2009 | 5:27 PM ET
CBC News
Finance Minister Jim Flaherty tells reporters in Toronto on Friday that the rapid rise of the value of the Canadian dollar is cause for concern. (Jim Ross/Canadian Press)The Canadian dollar jumped 1.90 cents to 91.60 cents US on Friday, a run-up of about eight cents since the beginning of May.
The loonie was last above 91 cents in early October 2008.
Finance Minister Jim Flaherty said the rapid rise is cause for concern and that Bank of Canada governor Mark Carney is monitoring the situation.
Speaking at an infrastructure event in Toronto, Flaherty said the government is always concerned about rapid changes in the Canadian dollar, which can have a major impact on exporters and the troubled manufacturing sector.
Analysts said a number of factors were at play in the sharp rise of the currency.
Canadian stock markets have staged a spring rally, with the TSX composite index gaining more than 37 per cent since March 10.
Crude oil prices are at a six-month high of more than $66 a barrel US, with more than $10 of that rise coming in May.
At the same time, the U.S. dollar has been weakening recently as investors trade their greenbacks for foreign equities.
The rise in stock markets and oil prices also reflects the hope that an economic recovery may be just around the corner.
"You've got a couple of things — you have these green shoots, signs that the U.S. and global economies are not basically decelerating as quickly as thought, which has helped boost commodity prices," said David Watt, senior currency analyst at RBC Capital Markets.
"And you have some concerns about the U.S. dollar, which is the most pressing concern that's going on now," he said. "I'm surprised. I didn't expect the Canadian dollar to get to these levels and the thing that changed my perception recently has been the concern about the U.S. dollar."
Analysts have also noted that the rising Canadian dollar is causing headaches for the Bank of Canada as it draws up economic forecasts because of the effect a higher loonie has on exports and manufacturers.
With files from The Canadian Press
