Both Canadian direct investment abroad and foreign direct investment in Canada recorded the highest percentage increase in six years at the end of 2006, largely due to a wave of acquisitions of Canadian firms by foreign investors and a weaker Canadian dollar compared to European currencies.

Direct investment abroad hit $523.3 billion, a gain of $63.7 billion or 13.8% from the end of 2005, Statistics Canada reported today.

That’s the fastest percentage increase since the technology boom of 2000.

The value of capital transactions during the year accounted for about three-quarters of the increase.

The depreciation of the Canadian dollar against foreign currencies increased the position by another $18 billion, as Canadian direct investments abroad are denominated in foreign currencies.

Meanwhile, foreign direct investment in Canada hit $448.9 billion at the end of 2006, up $41.3 billion, or 10.1%, from the end of 2005.

That was the fastest percentage gain since 2000, due largely to acquisitions of major Canadian firms by foreign investors.

As a result, the net direct investment position — the difference between Canadian direct investment abroad and foreign direct investment in Canada — increased to $74.4 billion at the end of 2006, up from $52 billion a year earlier.

The Canadian dollar lost ground against European currencies last year, depreciating by 12.4% against the pound sterling, 10.4% against the euro and 7.4 against the Swiss franc. The dollar remained stable compared to the U.S. dollar (up just 0.2%) and gained 0.7% on the Japanese yen.

Holdings of Canadian direct investment abroad were up in all major destinations. Direct investments in the United States rose by $19 billion to $223.6 billion, mostly because of capital outflows of Canadian firms to existing operations in their U.S. affiliates.