Canadian Dollar

Updated: Tue Aug. 04 2009 9:35:21 PM

CTV.ca News Staff

The Canadian dollar has finished the day at 93.07 cents US, slowly closing in on parity with the American greenback.

Tuesday marked an increase of 0.26 of a cent for the Loonie, while the U.S. dollar fell 0.30 of a cent.

"We're getting more and more people on Bay Street telling us that (parity) is likely to occur," BNN's Michael Kane said Tuesday before the markets closed.

One of the main reasons for the loonie's rise is a spike in oil prices, Kane said.

"September crude futures shot above the $70 mark yesterday to close out the floor trading session at $71.58 per barrel," he said. "That is the highest since the 12th of June."

The loonie has swing wildly in the last year-and-a-half, trading at near parity about a year ago but falling to 77 cents US earlier this year.

A rapidly rising loonie is good news for consumers, because it helps close the price gap between what Canadians and Americans pay for the same goods.

A report released last month by BMO Capital Markets said the price gap for a select basket of items is now 6.8 per cent, compared to 18 per cent for the same items one year ago.

The items ranged from saws to computers to Starbucks lattes.

But while a higher dollar helps the average consumer's pocketbook, economists agree that it puts the squeeze on industries such as manufacturing and forestry, which sell products south of the border.

The Bank of Canada has warned a number of times this summer that the surging loonie threatens this country's export-based economy, which is slowly starting to recover from the global financial crisis.

"In recent weeks, financial conditions and commodity prices have improved significantly, and consumer and business confidence have recovered modestly," the Central Bank said in a statement in early June.

"If the unprecedented rapid rise in the Canadian dollar (which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency) proves persistent, it could fully offset these positive factors."