Canadian Dollar Surges, Thanks to Oil Stores
RENEE MONTAGNE, host:
In the last week, the Canadian dollar hit its highest level since 1992. The climb has been boosted by soaring energy prices. The Canadian currency has risen almost 40 percent in the past two and a half years and over 10 percent in just the past four months. One of the reasons for the increase is because the Canadian dollar is now considered a petro currency. Richard Reynolds reports from Toronto.
RICHARD REYNOLDS reporting:
Canadians affectionately call their dollar the loonie, after the loon that appears on the $1 coin, and for the past few years, Canadians have been watching their loonie soar. A number of factors are driving the Canadian dollar higher. Government debt has been dropping for over a decade, inflation is low and interest rate spreads between Canada and the US are generally favorable, but many experts attribute the recent run-up to one fact: the high cost of oil. Mark Levesque is an economist with the Toronto Dominion Bank.
Mr. MARK LEVESQUE (Toronto Dominion Bank): Markets do tend to overreact. They tend to go on binges, on fads at times, and that's what we're looking at a little bit to some extent. The markets have focused on the fact that Canada is an oil producer, Canada is a big oil exporter. Canada tends to benefit substantially from the increases in crude oil prices that we've seen over the past little while.
REYNOLDS: So is the Canadian dollar the new petro currency? Markets do look at a lot of factors when pricing any currency, some rational and some not, but there is one thing that analysts see that makes them think Canada may become an oil powerhouse. In the province of Alberta lies a vast area called the tar sands, where huge quantities of crude oil are locked in sandy deposits. It's expensive to extract this oil, but with high oil prices, suddenly the oil sands are no longer a geologic curiosity. They are a huge new economic source of oil. Marty Say(ph) is an editor with The Globe and Mail newspaper.
Mr. MARTY SAY (The Globe and Mail): The fact of the matter is, the Canadian oil sands are now, in terms of proven and probable reserves, equal to all the oil in Saudi Arabia. So we are one of the world's biggest producers of oil sitting right next door to one of the world's most voracious consumers of energy.
REYNOLDS: Tens of billions of dollars are already flowing into various oil sands projects. Some analysts are now saying the loonie could approach parity with the US dollar within the next year. For NPR News, I'm Richard Reynolds.
STEVE INSKEEP (Host): This is MORNING EDITION from NPR News. I'm Steve Inskeep.
MONTAGNE: And I'm Renee Montagne.