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John Woods

More global investors are jumping onto the Canadian bandwagon.

The Canadian dollar net long position - or bets the currency will increase further - jumped 60 per cent last week and is now the largest position held against the U.S. dollar, the Bank of Nova Scotia says, citing the most recent report from the Commodity Futures Trading Commission.

It's now the biggest net long Canadian dollar position since November, 2007, which is when the currency hit a modern-day high, says John Curran, senior vice-president of CanadianForex.

The loonie was little changed Monday, trading at 98.07 cents (U.S.). It passed 98 cents on Friday, hitting a 20-month high after stronger-than-expected jobs numbers, and some strategists say the currency will hit parity by summer. As investment newsletter writer Dennis Gartman wrote Monday, "let the ticking begin as parity and beyond looms."

As of Friday, the currency had gained for 11 straight days, the longest streak in 23 years, according to Bloomberg, amid expectations of rising interest rates and commodity prices.

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Mr. Curran, who has worked in currency markets for two decades, is skeptical about the parity call. He says the move has been too much, too fast. "I'm not a big fan of this going to par yet. It needs a bit of a clearing out before we get a sustainable move above par."

Besides, "the Canadian economy doesn't function too well with the dollar at par."

A number of Canadian companies have cited the strong currency as denting earnings in recent weeks. The Bank of Canada continues to say it is acting as a drag on the recovery.

The currency has risen 3.3 per cent against the U.S. dollar this year. It's up 7.4 per cent against the euro and 10 per cent against the British pound.

Global investors are seizing on one of the few good news stories in the world today - Canada's fiscal position is the envy of many, it wasn't as hard hit in the recession and seems to be recovering more quickly.

"The fundamental picture does look pretty strong for Canada. But we're still nowhere near out of the woods of this global recovery story," Mr. Curran said. Any new threats to that recovery - such as tremors in Europe or questions about China's strength - will send people rushing back to the perceived safety of U.S. currency, he said.

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