The loonie continued its stunning gains Tuesday, climbing .73 to close at 96.48 cents US.

It had been as high as 97.47, its highest level since August 2008.

The Canadian dollar, shown dwarfing a U.S. dime, was trading well above 97 cents US on Tuesday. (Adrian Wyld/Canadian Press)

The loonie rose more than three cents last week and appears to be continuing the trend.

Canadian financial markets were closed on Monday but currency markets continued trading electronically overseas.

The U.S. dollar has weakened against almost all other currencies this year, but its fall is more pronounced against the Canadian dollar because a rally in commodity prices boosted the loonie as well.

Currency trader Ian Cochrane of Calgary-based BNH Strategies told CBC News the Canadian dollar's move reflects market optimism that an economic recovery is taking hold.

"The Canadian currency is seen as a currency that moves up when the world is healthy," he said, predicting parity with the greenback could be close.

A loonie at these levels is "a huge matter," Cochrane said. If the Canadian dollar goes above 97 convincingly, "we would have the possibility of a move to parity very, very quickly."

'This is not a penny mining stock we're talking about. It's our currency, the foundation of our economic growth'— Avrim Lazar, Forest Products Association of Canada

The 26 per cent appreciation in the Canadian dollar since March, from 77 cents to 97 cents US now, has brought it back to where it was before traders worldwide moved heavily into the American dollar last fall because it was seen as the least risky place to put their money.

Having said that, Cochrane said he expects currency markets are overly negative on the U.S. dollar and that its downward trend may have reached its limit.

The Canadian Manufacturers and Exporters estimates that for every one-cent rise in the Canadian dollar, exports fall by about $2 billion.

PowerShares U.S. Dollar Bullish Fund (showing U.S. dollar against six other currencies) 3-month chart

Avrim Lazar of the Forest Products Association of Canada called for the Bank of Canada to take action. "This is not a penny mining stock we're talking about. It's our currency, the foundation of our economic growth," Lazar said.

Most economists agree, however, that the central bank can do little because it lacks the huge reserves it would take to buy up U.S. dollars and counter the selling being done on currency markets.

Prime Minister Stephen Harper said Tuesday the Bank of Canada has ultimate responsibility for the dollar, but that he had no advice for the bank as it must remain independent of the government.

Gold rush

Gold prices have soared with the greenback's plunge. Bullion reached another record on the New York Mercantile Exchange on Tuesday, trading as high as $1,069.70 US an ounce. Cochrane said he believes some of that is people buying the metal as a hedge against a pullback in the stock markets, something he said was not a good idea, given that "gold has run with equities the last few years."

Gold closed Tuesday up $7.40 to $1,064.20.

Global traders generally view the loonie as a commodity-linked currency due to Canada's abundance of natural resources.

An index of commodity prices compiled by Toronto-Dominion Bank notes that commodity prices were up by an average of five per cent in U.S. dollar terms last week.

But because of the loonie's strength, in Canadian-dollar terms the index was up a more modest 2.7 per cent.

The price of oil — which is quoted in U.S. dollars — finished trading at $74.15 a barrel, up 88 cents Tuesday.

With files from The Canadian Press