The Canadian dollar hit its highest level since January 1978 after a report released today showed strong retail spending March.
The dollar jumped more than half a cent to US91.58 in morning trading.
Retail sales surged in March, resulting in a strong first quarter, Statistics Canada reported today.
March’s gains were widespread with seven of eight retail sectors posting sales increases.
After two months of little change in sales growth, total retail sales rose 1.9% in March to an estimated $34 billion.
The latest monthly increase helped retail sales in the first quarter of 2007 rise by 2.0%, marking a return to strong quarterly growth after a lacklustre fourth quarter of 2006.
The Canadian dollar has been shooting steadily higher since January, when it was below the US85¢ level.
Analysts offer several reasons for the loonie’s strength. The main one has to do with the Bank of Canada and interest rates.
The strong retail sales report was just the latest piece of economic data to highlight that the central bank may need to raise interest rates as early as this summer.
On Thursday, the monthly inflation figures showed the core rate of inflation — which excludes the most volatile items — rose to 2.5% last month. That’s the highest in more than four years.
Other reasons for the dollar’s strength include persistently high commodity prices, the spate of takeovers of Canadian companies by foreign groups, and an American dollar that is weakening against many foreign currencies.
Canadian dollar hits 29-year high
Strong retail sales may lead Bank of Canada to hike interest rates
- By: IE Staff
- May 18, 2007 May 18, 2007
- 09:50