The Canadian dollar pierced the 68-cent (U.S.) mark Wednesday, enjoying continued gains against its U.S. counterpart the day after this country's central bank started hiking interest rates and fresh doubts emerged in Washington about the U.S. commitment to strong greenback.
The loonie closed at 68.08 cents, up 0.46 cents from Tuesday's closing price, according to the Bank of Canada. The loonie hasn't closed above 68 cents since July, 2000.
The recently resurgent currency got some of its momentum after the Bank of Canada raised interest rates Tuesday.
"The Bank of Canada's rate hike yesterday strengthened the bid for the Canadian dollars," Royal Bank assistant chief economist John Anania said.
"Widening short-term interest rates differentials relative to the U.S. and the likelihood that they will keep widening is music to the ears of those holding on to Canadian dollars."
With the widening gap in interest rates between Canada and the United States likely to persist, further gains by the loonie are expected an upward revision of RBC's year-end target for the dollar of 68.50 cents "will be a topic of discussion in the weeks to come," he said.
The loonie has been on the rise since the start of the year - climbing by nearly 6 per cent against the greenback in January and February, its best two-month performance on record - with recent gains fuelled by speculation that the Bank of Canada was in the market to raise interest rates to fight inflation.
The central bank made good on those rumours Tuesday, hiking rates by a quarter percentage point even as other central banks around the world were considering further easing because of global economic worries.
Tuesday's tightening, however, was warmly greeted by the markets, which sent the Canadian dollar up almost a quarter of a cent by the close of business.
"Currency markets certainly liked the bank's move," BMO Nesbitt Burns economist David Watt said in his morning commentary on Wednesday morning.
"The loonie shot higher as soon as the news of the move hit the headlines, moving quickly toward the [67.50-cent]level. After trading there for the bulk of the day, the loonie scored another win after Canadian markets closed making a spirited run for the $1.47 (Canadian) level, which brought the currency achingly close to 68 cents (U.S.)."
Also working in the Canadian dollar's favour were comments by U.S. Secretary Treasurer John Snow in Washington late in the day in which he said he was "not particularly concerned" about the greenback's recent declines.
"The dollar is in the marketplace, and everything in the marketplace goes up some and falls some," Mr. Snow told reporters. "It's within normal ranges. I don't see anything troubling about it."
Mr. Snow's comments - coupled with ongoing concerns about the potential for a U.S.-led war in Iraq - were viewed by economists as continuing to hold back the greenback, to the benefit of currencies including the Australian and New Zealand dollars.
The U.S. dollar, meanwhile, was trading lower against most European currencies early Wednesday. It was at a four-year low against the euro.