Record Oil Prices Continue to Push Canada’s Dollar, Inflation
From Staff Reports
Surging oil prices have pushed inflation in Canada to its highest rate since May 2006, Bloomberg reported Friday.
And right behind it, not surprisingly, Canada’s dollar hit a 33-year high of $1.0344 (one dollar equals 96.67 Canadian cents) — quelling U.S. hopes the Bank of Canada would cut interests rates.
The Canadian Consumer Price Index (CPI) rose at a 2.5% annual rate in September from a year earlier, compared with a 1.7% rate in August, as gasoline climbed 13%, Statistics Canada reported last week. On a monthly basis, prices rose 0.2% from August to September.
The Bank of Canada said inflation will return to its 2% target sooner than expected. The central bank kept its benchmark rate unchanged at 4.5% on Oct. 16.
Since December, the Canadian dollar has gained 19.8%, reaching parity with the U.S. dollar on Sept. 20, its first time since 1976.
Crude oil hit a record $90 a barrel in New York on Friday morning. Half of Canada’s exports are commodities, and price hikes (or declines) in them affects our northern neighbor’s currency and economy.
The weakening U.S. dollar and volatile credit market have driven many investors to gold, further adding more to Canada’s growth. Inflation was also given major push thanks to the rising costs of mortgage interest, transportation, alcoholic beverages and tobacco.
News and Related Story Links:
- Bloomberg:
Canada’s Dollar Rises to 33-Year High as Inflation Accelerates. - Money Morning:
Canada’s Unchanged Interest Rate Signals its Concern for U.S. Credit Crunch. - Money Morning:
Canadian Dollar Reaches Par Against the Greenback. - Money Morning:
With Oil, Uranium and Gold, There’s Nothing Crazy About This Canadian Loonie Tune.
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