The loonie on Friday closed at its highest level since the disco era after a new report showed strong retail spending in Canadian stores.

The dollar jumped more than three-quarters of a cent to end the trading day at 91.79 cents US. It hasn't closed that high since October 1977.

The latest boost to the loonie came courtesy of March retail sales figures, which were released Friday morning. They showed Canadian spending that month rose by a larger than expected 1.9 per cent, following two relatively flat months.

The Canadian dollar has been shooting steadily higher since January, when it was below 85 cents US. 

Analysts offer several reasons for the loonie's strength. The main one has to do with the Bank of Canada and interest rates.

The strong retail sales report was just the latest piece of economic data to highlight that the central bank may need to raise interest rates as early as this summer.

On Thursday, the monthly inflation figures showed the core rate of inflation — which excludes the most volatile items — rose to 2.5 per cent last month. That's the highest in more than four years.

Other reasons for the dollar's strength include persistently high commodity prices, the spate of takeovers of Canadian companies by foreign groups, and an American dollar that is weakening against many foreign currencies.

TD Securities' chief fixed-income strategist Marc Lévesque told CBC News he thinks it's possible the central bank could hike rates as early as the July policy meeting.

Many analysts are shying away from predicting parity with the U.S. dollar any time soon. The last time the two currencies were worth the same was in November 1976. But National Bank Financial's chief economist, Clement Gignac, is one who thinks parity is coming.  

"We reiterate that the CAD is likely to reach parity with the USD before the end of the decade (average of 95 cents in 2008 and 1.00 in 2009)," he wrote last week.

CIBC World Markets chief economist Jeff Rubin also sees room for the loonie to rise further. The more interesting story, he says, is that the Canadian economy so far seems to be successfully handling a dollar this high.

"We're looking at a 30-year-high currency and a 30-year-low unemployment rate, and that's not normally the way the Canadian economy has operated in the past," he told CBC News.

Rubins said the manufacturing jobs that have been lost because of the high dollar have been replaced with other jobs.