Canadian currency in overdrive

May 30th, 2009 - 1:19 pm ICT by IANS  

Toronto, May 30 (IANS) The Canadian dollar is in overdrive. The loonie - as it is called - rose to 92 US cents Friday, raising fears about its adverse impact on the nation’s economic recovery.
Buoyed up by rising oil and commodity prices, coupled with a weakening US greenback, the Canadian dollar crossed the 90 cent level for the first time in seven months.

During the last four weeks alone, the loonie has risen as much as eight percent.

It is a major gain since March when the Canadian currency sank to 76.98 US cents for the first time since September 2004 on plunging oil prices.

However, since then the loonie has risen almost 15 percent even as all major sectors of the Canadian economy - manufacturing, housing, automotives, exports and tourism - have sunk.

With Canada’s international trade intertwined with the US, experts worry that the dramatic rise in the Canadian currency will adversely hamper economic recovery as the government faces a whopping $50 billion deficit.

Financial experts say the loonie is expected continue its upward journey, adding to the deficit.

They also say that the rising currency will not only hamper economic recovery but also further erode manufacturing jobs as the Canadian unemployment rate already hovers over seven percent.

There was more bad news Friday as the Royal bank of Canada posted a loss of $50 million for the second quarter on erosion in its US operations.

The nation’s number one bank had made a profit of $928 million during the same period last year.

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