The Canadian Dollar has reached a 13 ½ year high against the USD. The reason, you may have guessed, has a lot to do with oil. A recent report on Canada’s oil resources estimates Canada’s famous oil sands may be worth more than $1 trillion. And that is a conservative estimate. Since the price of oil seems likely to remain above $50 in the long run, Canadian oil producers have reevaluated the viability of certain oil fields, now concluding that oil can be profitably extracted and sold. At this point, it seems nothing short of a complete collapse in the price of oil could halt the momentous run of the Canadian Dollar. The Ottawa Sun reports:

“The study … showed the oil sands are going to significantly contribute to the GDP growth over the next 15 years. That refocused a lot of international accounts on the whole ‘Canada as a big oil producer story.

The Canadian economy has grown quicker than expected in the latter part of this year. This has raised fears of inflation arising in the economy. As a result experts now predict that the Bank of Canada will again be forced to raise interest rates, making this the third such increase inside of a year. According to a recent article the central bank will not likely curb increases until it hits the projected 4% target. Experts see the economy finally starting to show signs of responding to the slow down pressure via the increased rate as evidenced in the drastic turn in which are profiled in

Canada’s economy grew at 3.8% in 2005 Q3, marking its fastest quarter of growth in over a year. The Canadian economy has historically been driven by exports of commodities. In this latest quarter, however, retail sales data indicate consumers have started to pick up some of the slack in the economy. As a result, Canada’s Central Bank has hinted that it will further raise short term interest rates from the current level of 3%. Currency strategists will likely remain bullish on the Canadian Dollar, as longs as its economy continues to hum and the differential between Canadian and US interest rates continues to narrow. Bloomberg News reports:

Yields on interest-rate futures indicate traders expect the central bank will raise its benchmark rate a quarter percentage point…on Dec. 6 and Jan. 24. The yield on the March futures contract was 3.86 percent, about the highest this year.

Earlier this week, the Canadian government received a vote of no-confidence, effectively bringing an end to months of allegations that Canada’s ruling Liberal Party was corrupt. As a result, the Canadian Parliament will be dissolved, and a snap election will be held at the end of January. In the past, currency traders have responded to episodes of political uncertainty be selling that nation’s currency. In this case, however, the Canadian Dollar was virtually unaffected. Canada’s economy continues to outperform on the heels of strong exports and lofty commodity prices, and its Central Bank is set to hike interest rates again next week. Reuters reports:

“With underlying support for the loonie from developing M&A deals, the geopolitical risks are still seen as taking a backseat to positive flows and fundamentals,” said [a senior currency strategist.