CANADIAN DOLLAR (THE LOONIE) IS GETTING CLOSE TO TRADING AT PAR WITH THE USA DOLLAR...USA WEAKNESS IS GOOD FOR CANADA!

Don't you hate seeing that small print on book and magazines that says one amount as the USA price and a larger amount in Canada. I have had a store often try to charge the Canadian price for a book or magazine.

The Canadian dollar rallied for a third straight week, touching a 14-month high and moving closer to parity with its U.S. counterpart as signs of economic recovery pushed commodities and stocks higher.

Canada’s currency gained as crude oil, the nation’s largest export, surged 10 percent and the Dow Jones Industrial Average surpassed 10,000 for the first time in a year. The Bank of Canada will keep interest rates at a record low level when it meets on Oct. 20, according to all 23 economists in a Bloomberg News survey.

“As long as equities continue to go up, it will be positive for the Canadian dollar,” said Maria Jones, a currency trader in Toronto at TD Securities Inc., a unit of Canada’s second-biggest bank. Stocks will continue to rally as long as “we are seeing moderate growth in the U.S.” and the Federal Reserve holds interest rates near zero.

The Canadian currency, nicknamed the loonie for the aquatic bird on the C$1 coin, appreciated 0.5 percent to C$1.0370 per U.S. dollar yesterday in Toronto, from C$1.0422 on Oct. 9. One Canadian dollar buys 96.44 U.S. cents. The currency climbed to $1.0207 on Oct. 15, the strongest level since July 29, 2008. The loonie and the U.S. dollar last traded on a one-for-one basis on July 22, 2008.

Employment in Canada rose last month six times more than forecast, unexpectedly reducing the jobless rate to 8.4 percent, the government said on Oct. 9. Service industries in the U.S., the nation’s biggest trade partner, expanded in September for the first time in a year, an Institute for Supply Management index showed on Oct. 5. U.S. retail sales excluding automobiles climbed 0.5 percent last month, more than forecast, the Commerce Department said on Oct. 14.

The probability that the Canadian currency will trade at C$1 per U.S. dollar at year-end is 60 percent, according to implied volatility from options trading monitored by Bloomberg. The chance of parity in one month is 42 percent, trading shows.

The Canadian currency pared its advance yesterday, depreciating 0.3 percent, after Statistics Canada said the consumer price index declined in September for a fourth month, the longest stretch since 1953. The report spurred speculation that subdued inflation will allow the Bank of Canada to leave borrowing costs unchanged next week.

The annual inflation rate excluding gasoline and seven other volatile items -- the so-called core rate the central bank uses to discern future price trends -- slowed to 1.5 percent, from 1.6 percent in August.

The inflation data “will go a long way to allay fears of an early hike by the BOC,” David Watt, senior currency strategist in Toronto at RBC Capital Markets, wrote in a note yesterday. The firm is a unit of Canada’s biggest bank.

Central bank policy makers restated at their last meeting in September a pledge to keep the benchmark overnight interest rate unchanged through June 2010 unless the outlook for inflation changes. The rate has been at a record low 0.25 percent since April. It was 4.5 percent when the bank began lowering it in December 2007.

Canadian Prime Minister Stephen Harper said yesterday in remarks to reporters in Toronto that he shares Bank of Canada Governor Mark Carney’s concern that gains in the country’s currency could slow recovery. Carney said in a speech on June 4 that a persistently strong Canadian dollar would “work against” positive factors such as improved trade.

“The big speculation is that they might increase their rhetoric in regards to the currency,” TD’s Jones said. “They can talk, but the question for the markets is, are they going to act? If you don’t think they are going to act, then the talk really doesn’t mean anything.”

The Standard & Poor’s 500 Index gained 1.5 percent this week as JPMorgan Chase & Co. and Intel Corp. posted better-than- expected earnings. So far, 80 percent of companies in the index surpassed third-quarter earnings estimates.

Should companies continue to surprise investors on earnings, “it will be good for equities and put ongoing downward pressure on the U.S. dollar,” wrote Camilla Sutton and Sacha Tihanyi, currency strategists at Scotia Capital Inc. in Toronto, in a note yesterday. The firm is a unit of Canada’s third-largest bank.

The Reuters/Jeffries CRB Index, a gauge of 19 raw materials and commodities, rallied 5.2 percent, the biggest weekly gain since May. Canada generates more than half of its export revenue from raw materials, including oil. Crude oil for November delivery touched $78.75 a barrel on the New York Mercantile Exchange yesterday, the highest level in a year.

Oh, Canada!