The Canadian dollar marched closer to parity with its U.S. counterpart Wednesday, supported by higher commodity prices and the prospect of continued low American interest rates. The loonie traded above 99 cents US during the morning, but slipped back to 98.97, up 0.35 of a cent on the day, by 10:30 ET.
Yesterday, the U.S. central bank said it will keep interest rates unchanged "for an extended period." That raised the prospect that Canadian interest rates will begin rising before those in the U.S., increasing the value to foreigners of Canadian dollar-denominated debt and the demand for Canadian currency.
"Yesterday's announcement puts the Bank of Canada in a tough position," Dan Sumner, an economist with Edmonton-based ATB Financial, said in a commentary. "The Canadian economy is performing better than the U.S., which means interest rates here will probably begin rising sooner. However, with the continued worries about the Canadian dollar and Canada's export industries still fragile, raising rates will be no easy task." Read more here.