CG: Dollar flirts with parity as crude nears two-year high
The Canadian dollar flirted with parity Monday after oil prices rose to the highest level in nearly two years.
Benchmark oil prices spiked more than two per cent, or $1.75 to settle at $86.62 US per barrel, the highest since October 2008. That sent the Canadian dollar higher, where it climbed as high as 99.9 cents to the greenback before settling at 99.72 cents, up about half a penny on the day.
The Toronto Stock Exchange's main index also reached an 18-month high, gaining 35.29 points to settle at 12,186.35.
Analysts said they expect the loonie to break through parity in the coming days based on a combination of improving fundamentals for the Canadian economy and positive trading momentum as investors diversify American and European holdings into what many see as a positive growth story.
"It's always been our belief the Canadian dollar will achieve parity. The only question has been the timing," said Gil Dawson, a partner with SBM Inc. market consultants in Calgary.
Likewise, oil prices could top $100, despite rising inventories in the world's largest consumer, based on the belief that the global economy is improving.
"Right now, that's what the market is betting on. If the market wants to believe demand is improving, prices will continue to go up," Dawson said.
Canada stands to benefit from economic recovery south of the border, which increases demand for the country's commodity-based exports. Adding to strength in Canada is lower government debt.
