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The loonie is pictured in this illustration picture taken in Toronto January 23, 2015.

MARK BLINCH/REUTERS

The Canadian dollar broke the 81-cent (U.S.) mark on Friday for the first time since 2015, continuing its recent surge on the strength of the country's hot economy, in contrast to lacklustre job-growth numbers in the United States.

Data released on Thursday showed the Canadian economy growing at a breakneck 4.5 per cent in the second quarter, the strongest posting since 2011.

Meanwhile, on Friday the U.S Bureau of Labor Statistics released a report showing 156,000 jobs were added to the U.S. economy in August, significantly below expectations of around 200,000.

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The two reports have shifted expectations about central-bank policy in the two countries. Some analysts now expect the Bank of Canada to raise its benchmark overnight interest rate by 25 basis points as early as next week. Such a hike, which would be the second this year, would put the interest rate at 1 per cent, up from 0.75 per cent set in July. If the Bank of Canada doesn't move next week, most analysts expect a rate hike later this year.

In the United States, on the other hand, the Federal Reserve may be rethinking another rate hike this year, following the worse-than-expected job numbers.

Canada's strong performance relative to the United States is driving up demand for the loonie – as investors bet on higher rates in Canada. After surging above 81 cents on Friday, the Canadian dollar settled back to around 80.71 cents, up nearly a cent on the day.

"Nudging interest rates a quarter point higher is clearly warranted after a scorching first half" of economic growth, Avery Shenfeld, managing director and chief economist of CIBC Capital Markets, wrote in a note on Friday. "But a further climb in the Canadian dollar is much less welcome."

The Bank of Canada is now in a tricky position as it weighs the concerns of many indebted consumers and homeowners against the export sector, which benefits when the Canadian dollar is low.

"The central bank wants to shrink the slice of the growth pie coming from housing and household debt, while keeping the currency at levels that will sustain exports and related capital spending," Mr. Shenfeld said.

The central bank could manage the situation by raising rates in September, but making it clear that there would be a pause on further increases, he said.

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Alternatively it could push the announcement back to October, which would "help signal to markets that hikes will be gradual," he said, limiting the rush toward Canadian dollars.

Derek Holt, head of Capital Markets Economics at Scotiabank, is betting on a 25 basis point announcement next Wednesday, along with " a nod to how there are further hikes to come beyond simply unwinding the two 25 basis point cuts in 2015."

"We believe the central bank remains on the path toward raising its policy rate by about one full percentage point by the end of next year in a more front-loaded set of moves—and likely more increases than priced in by markets through 2018," Mr. Holt wrote in a note this week.

"One might quip that Canada has achieved US President Trump's wish of 4 per cent growth for his own country," he added.

Concern about driving up the value of the loonie with more aggresive monetary policy shouldn't be overplayed. "Going forward we think that global (including US) income growth effects on Canadian exports can offset the deterioration in price competitiveness," Mr. Holt wrote.

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