Loonie parity “new reality,” economist says

OTTAWA — The robust Canadian dollar matched the U.S. greenback this morning for the first time in nearly two years.

The loonie, which has climbed 29 percent in the last year, hit $1.0001 at 6:48 a.m. before backing off slightly.

Economists predict the Canuck buck will hop back and forth over the parity line for several months before increasing in value going into 2011.

"Parity is the new reality,” Scotiabank’s currency strategist Camilla Sutton told the Globe and Mail.

The loonie hit a high of $1.10 in November 2007. But unlike that volatile, meteoric run, the ascension this time has been more "gradual and based on fundamentals," and should be longer lasting, says Sutton.

The Canadian dollar continues to propel based on the country’s stable economy, firm commodity and resources prices and recent news that the Bank of Canada will increase interest rates ahead of the Federal Reserve in the U.S.

The high loonie and weak U.S. dollar hurts exporters and their service providers, like truckers. Often, without hedging, the loss in currency value comes right out of the bottom line.

It’s better news for importers who may benefit from lower prices, as well as Canadian consumers who expect retailers to match U.S. prices on goods if parity is sustained.