The Canadian dollar hit its highest level in almost three decades yesterday as global investors dumped U.S. dollars and placed their bets on Canada.
The loonie touched 89.56 cents (U.S.), the highest it has been since May, 1978, as traders warmed to the odds on Canadian interest rates rising, and investors took a shine to an economy basking in record commodity prices. The U.S. greenback, meanwhile, tumbled against other currencies on predictions rates will rise faster elsewhere than in the United States.
The loonie's breathtaking ascent this week, at 1.8 per cent, was fuelled by soaring demand from global institutional investors, hedge funds, foreign central banks and individual investors. It came as a shock to many currency experts and left them wondering what more is in store.
"Everybody's buying," said Jason Bonanca, a currency strategist at Credit Suisse in New York. "There's been a confluence of circumstances, which have conspired to make the Canadian dollar very strong -- somewhat against our own expectations."