The Canadian dollar surged to the highest level since July 2008 early Friday, on surprisingly positive employment figures from Statistics Canada.
The loonie shot to US98.41¢ in early trade, up from US97.63¢ at the end of the day Thursday, and past the recent high of US97.97¢ high of Oct. 15 of last year. The last time the loonie was past the 98-cent threshold was in July 2008.
The February StatCan labour report showed the country added 20,900 net new jobs, lowering the unemployment rate one basis point to 8.2%. The strong data adds to mounting evidence the Canadian economy is moving forecfully out of recession and increasing pressure on the Bank of Canada to raise interest rates. The central bank had promised to hold rates at rock bottom 0.25% until July — inflation permitting.
Douglas Porter, deputy chief economist with BMO Capital Markets, called the February results "impressive," noting the strong gains in full-time work and the lowered jobless rate that's five basis points lower than the recent peak of 8.7% last August.
"One small quibble was that the job gains relied quite heavily on the public sector, and we know that train can't continue much longer," he said in a research note, referencing the job situation in government, where action is expected to deal with growing budget deficits.
Andrew Pyle, a wealth advisor with ScotiaMcLeod, said he expects the loonie to reach parity as early as next week.
"I'm sure Mr. Carney and crew will want to see if the loonie does in fact break above parity, but the pressure is on to start moving official rates higher, whether by the end of June or sooner," he said in a note. The prospect of higher interest rates has been nudging the loonie higher.
Nathan Janzen, economist with RBC Economics, said the Bank of Canada will begin to withdraw its monetary stimulus as the unemployment rate starts to fall in the second half of the year.
"However, we expect that moderate inflation growth will allow the Bank of Canada to keep the pace of tightening moderate," he said in a note Friday morning.
RBC forecasts interest rates to rise 100 basis points through the second half of the year, finishing 2010 at 1.25%.
The last time the loonie was past the 98-cent threshold was in July 2008.
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