Loonie Continues To Soar

The Canadian dollar crossed the 83 cent (U.S.) mark Thursday, as its U.S. counterpart continued to stumble on concerns about that country's growing current account deficit in the wake of the presidential election.

Ahead of the market open, the Canadian dollar was trading at a fresh 12-year high of $83.04 cents (U.S.). The dollar hasn't topped 83 cents since September, 1992.

A day earlier, the loonie managed the biggest increase against the U.S. dollar of 14 major currencies, climbing 1.3 per cent to finish the day at 82.71 cents.

The gains came as the U.S. dollar faltered on world currency markets despite the win by incumbent President George W. Bush as traders worried about the size of the twin U.S. trade and current account deficits and the potential impact for the world's biggest economy.

In early going Thursday, the U.S. dollar was within half a cent of a record low against the euro. It also lost ground against the yen and was at an eight-year low versus the Swiss franc.

The greenback's decline surprised many who had speculated that a Bush win would result in a rally for the flagging U.S. dollar. Some subsequently suggested that mounting worry about the imbalances in the U.S. economy had ultimately taken hold and suggested that the U.S. dollar would have lost ground regardless of who ultimately took office.

The U.S current account deficit — the broadest measure of its dealings with the rest of the world — was at an annual rate of $665-billion in the second quarter, which was 5.7 per cent of U.S. gross domestic product.

In this country, BMO Nesbitt Burns economist David Watt said, the Canadian dollar has seen the benefit of a number of factors, resulting in it out performing other world currencies.

“Fiscal surplus plus current account surplus plus a central bank that does not sound overly concerned about the strength of the currency plus the prospect of further rate hikes equals a currency that outperforms competitors,” he said in the brokerage's morning note to clients.