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Huggy85
12-23-2011, 09:05 AM
Canada's dollar is turning into a haven for foreign-exchange investors shunning European turmoil and seeking the safety of the U.S. without the budget deficits or political gridlock.

The currency, which underperformed nine major peers in Bloomberg Correlation-Weighted Indexes in the first eight months of the year, has rebounded, topping all except the U.S. dollar and yen since. As the U.S. struggles with a $1.3 trillion budget shortfall, AAA rated Canada may use rising commodity revenue and spending cuts to balance the budget within five years.

Bank of Canada Governor Mark Carney will be the only central bank leader in the Group of 10 countries to raise interest rates next year, according to forecasts compiled by Bloomberg News. Inflation has exceeded the bank's 2 percent target for 11 months as the economy grows at double the pace of the Group of Seven nations. Canada's six largest banks say the so-called loonie will gain versus the dollar even as the U.S. economy strengthens.

Canada's economy is growing at 3 percent, twice the average pace of Group of Seven and euro-area nations. Finance Minister Jim Flaherty pledged his Conservative Party government will eliminate the budget deficit, forecast at C$31 billion this fiscal year, by 2015. The U.S. deficit is $1.3 trillion, or 9.6 percent of output. Canada's budget deficit is 4.3 percent of output.


http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/05/bloomberg_articlesLVQFAD0YHQ0X.DTL