Plus, Bank for International Settlements warns fiscal woes could reach a ‘boiling point.' Renewed fears over Greece's debt crisis. And, China holds firm on the yuan Dollar touches parity Issues old and new are combining this morning to shake up currency markets. The Canadian dollar briefly touched parity with its U.S. counterpart before backing off only marginally, the euro gave way to new fears over the Greek debt crisis, and the pound slipped on what the coming British election could mean for the country's economy. The Canadian dollar continued to be bolstered by the country's stronger economy, firmer commodity prices, Ottawa's fiscal standing and speculation that the Bank of Canada will act before the Federal Reserve to boost interest rates. Also lending a hand was a decision by Australia's central bank to hike its benchmark lending rate again by one-quarter of a percentage point, its fifth such move in six months. “Central banks with strong fundamentals are turning increasingly hawkish, and that's true for the Bank of Canada as well,” said Scotia Capital currency strategist Camilla Sutton, noting that the move toward parity itself acted “as a bit of a magnet.” Scotia Capital projects the dollar will hover around parity for some time, and then continue to strengthen through the end of 2011. Ms. Sutton noted that the loonie has climbed 29 per cent in the last year. And while the last move to parity a few years ago “was a violent run that overshot dramatically,” this one has been more gradual, measured and based on fundamentals, which should allow for a “more lasting base.” “On almost every relative measure Canada is strong,” she said. “Fundamentals are better than both economists and the central bank anticipated; inflation is firmer, job gains are larger and growth is running well above expectations. Canadian sovereign risk is low, which in the current environment is a key metric for global investors. Sentiment is bullish for both [the Canadian dollar] and Canadian-based assets, which is driving [Canadian dollar] positive currency flows. Finally, the groundwork has been laid for the Bank of Canada to turn hawkish.”

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