Canada’s loonie is flying high

No more dissin’ the loonie.

The Canadian dollar has reached virtual parity with the U.S. dollar for the first time in 31 years, a point of pride with Canadians who may still remember when their currency was nicknamed the “northern peso.”

The loonie, so called because of the bird engraved on the one-dollar coin, was worth 99.9 U.S. cents in official bank trading Thursday, up from 98.6 cents on Wednesday.

To put it another way, one U.S. dollar bought $1.001 Canadian -- down from nearly $1.17 Canadian at the end of last year and $1.60 in March 2002.

The last time the two currencies were at par was in November 1976, the year Montreal held the Summer Olympics.

The American currency’s supremacy had long made Canada a relative bargain for U.S. tourists and for Hollywood film and TV producers. Those days may be gone. Now, Canadians may be finding the U.S. to be a bargain.

The U.S. dollar’s slide against its northern rival is part of a broad decline in the greenback’s value worldwide this year. It accelerated this week after the Federal Reserve cut short-term interest rates, making some dollar-denominated debt less attractive to foreign investors.

By contrast, Canada’s dollar is gaining more appeal, thanks in part to the country’s booming exports of commodities including oil, natural gas and gold.

In general, a currency’s value reflects the health of the economy that backs it.

“Clearly they [the markets] are looking at the strength of the Canadian economy,” Finance Minister Jim Flaherty said Thursday.

Carlos Leitao, chief economist at Laurentian Bank of Canada, said the “huge increase in commodity prices in general has fed the acceleration of the Canadian dollar. The fact that economic growth in Asia and in general has accelerated has fed this large appetite for natural resources.”

But the loonie’s strength also means pain for Canadian manufacturers by making their goods more expensive in the U.S., unless they accept lower profit margins.

The Canadian dollar’s rise will make it tougher for the auto parts, fabricating, forestry and furniture sectors, among others, analysts say.

Reduced cash flow for those industries will lead to cost-cutting, which could mean more lost jobs and plant closings and less investment in research, said Jayson Myers, president of industry group Canadian Manufacturers and Exporters.