Bank of Canada Warns That A Strong Loonie Poses a Threat

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The Canadian dollar jumped more than 1 US cent today, even when the Bank of Canada sent out a warning concerning the loonie’s persistent strength the day before.

The loonie reached a mid day high of 93.36 cents US before closing at 93.34 cents, which makes it up 1.05 cents US.

This is a considerable jump from Monday’s close of 92.29 cents.

The loonie’s rise came about from the Toronto Stock Market rising to its highest point of the year amongst a rise in commodity prices and consumer data from the United States which shows retail sales rose in August by an amount which is at its largest in 3 years.

Bank of Canada deputy governor John Murray has warned that a strong loonie is a barrier to growth, and will make the road to recovery rougher than desired.

Murray has noted that global recovery is expected to be slow. He did note that Canada has several advantages over many other countries, such as a sounder banking sector, low government debt and more balance household spending.

The Bank of Canada has continuously warned about the dangers a strong dollar poses to Canada’s industrial sector, however not many economists see Governor Mark Carney go beyond bringing the loonie down.

The bank’s official forecast for the growth next year was of 3%, however it was based on the loonie averaging about 86 cents US.

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