Canadian currency hits parity with US dollar

TORONTO - The Canadian dollar hit parity with the US dollar Wednesday, closing at slightly more than 100 cents US.

Called loonie, the Canadian dollar has been hovering the vicinity of the greenback during the past few days even as the US currency is weakening after the US Fed plan to pump additional $600 billion into the economy to stimulate recovery.

The Canadian dollar has one of the major currencies to gain against the US greenback because even the euro has also weakened over concerns about the debt crisis facing Ireland.

The loonie had hit the historic high of 110 cents against the US greenback in November 2007. Then it had sunk to 77 cents US last year as the global crisis deepened.

The Canadian currency is likely to stay at these levels against the greenback because additional $600 billion being pumped into the system by the Fed will keep the US currency weak and make US exports cheaper.

However, with about 80 percent of Canadian exports going to the US, the high loonie is posing major challenges for Canadian manufacturers, exporters and tourism and the country’s trade deficit.

In fact, in its latest report, Statistics Canada has said that the country’s trade deficit with the world is growing fast. The report said Canada’s trade deficit with the world jumped from $1.5 billion in August to $2.5 billion in September. Canada’s merchandise exports declined 1.7 percent to $33.1 billion in September as imports rose 1.2 percent to $35.6 billion, further widening the country’s trade deficit.

Because of the high loonie, Canada’s trade surplus with the US has also declined to $1.6 billion from $2.9 billon in August.

Canada and the US constitute the world’s biggest trading bloc, with their bilateral trade touching more than $600 billion annually.