Loonie hits seven-week high on oil, housing data

The Canadian dollar inched up to reach a seven-week high Monday on rising oil prices, better-than-expected housing data and general market optimism.

At its peak, the loonie climbed to 97.41 cents US after Friday’s close of 97.19 cents.

Last week the dollar hit a 25-year high against the British pound.

The dollar closed up 0.27 of cent to 97.31 cents US.

A small gain in commodities, a modest pullback in the U.S. dollar and solid domestic economic data all lifted the loonie higher, Bank of Montreal economists said.

Also on Monday, Canada Mortgage and Housing Corp. reported housing starts surpassed expectations to reach 196,700 units in February, up from 185,400 units in January.

Since January, the dollar picked up 2.6% against the greenback.

Bank of Nova Scotia currency strategist Sacha Tihanyi said the bank projects parity with the U.S. dollar by the end of the second quarter. Still, he sees currency fluctuations to play out in the nearer-term.

“It’s almost never a straight-line approach,” he said.

The global economic recovery in general is expected to drives gains for the Canadian dollar as demand for commodities rebounds.

“We see it as fairly positive,” Tihanyi said.

But a lofty loonie isn’t always advantageous, especially for Canada’s already hard-hit manufacturers who tend to see exports drop when the cost of their goods increases along with the value of the currency.