The Canadian dollar sprinted higher Friday to end at its highest level in nearly 10 years as its U.S. counterpart weakened and traders savoured favourable interest rate spreads.
The loonie ended trading at 76.05 cents (U.S.), up from Thursday's closing price of 75.87 cents.
A day earlier, the dollar had breached the 76-cent mark -- rising as high as 76.20 cents -- before sliding back near the end of the session. Its high Friday was 76.25 cents.
The dollar hasn't closed above 76 cents since January, 1994.
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Friday's gains were again seen as a continuation of the same trend, driven by a weaker greenback and increasing signs that interest rates in this country -- which were held steady earlier this week -- are likely to stay put at least for the next little while.
At least part of the Canadian dollar's rise this year has been attributed to the spread between interest rates in the United States and Canada.
“The Canadian dollar is on an absolute rampage,” BMO Nesbitt Burns senior economist Douglas Porter said in the brokerage's daily commentary.
“...The combination of rising commodity prices and the dawning realization that the Bank is on hold -- and short-term spreads are therefore locked in -- helped power the Canadian dollar higher.”
Manufacturers and exporters have repeatedly raised a red flag on the loonie's sudden ascent this year, saying jobs will be put at risk if the dollar's gains aren't curbed. The Canadian dollar has risen 20 per cent since the start of 2003.
On Thursday, Finance Minister John Manley sidestepped questions about what he felt the appropriate level of the dollar should be, but said exporters should be able to adjust to the higher dollar.
"They will I believe have access to an expanding U.S. market and that should give them the opportunity to continue selling well into the U.S.," he said.
Mr. Porter also noted that the “rapidly emerging” consensus of an 80-cent dollar over the next 12 months “seems almost conservative now.”
“However, currency markets are rarely neat and tidy, and there seems to be very little standing in the way of an overshoot by the Canadian dollar,” Mr. Porter said.
Friday's gains also came as the U.S. dollar lost ground against both the euro and the yen.
At least some of Friday's weakness in the greenback came after talks between U.S. President George W. Bush and Japanese officials, which some market players interpreted as a sign that the U.S. favoured a softer dollar as a means of help its current economic recovery by boosting exports.