The beleaguered loonie is finally seeing some strength, opening at US65¢ today.

The Canadian dollar is getting a boost from a combination of domestic strength and comparative weakness in the U.S. dollar lately.

The loonie has been gaining strength over the past month, thanks to the outperformance of the Canadian economy, relative to the U.S. It also received a boost from a recent credit upgrade by Moody’s Investors Services, to its highest ranking.

And, the Bank of Canada has been supporting the currency through independent policy action and positive comments. Reuters reports that over the long weekend, Bank governor David Dodge was quoted in an Italian newspaper as saying Canada’s economy could grow 3% to 4% year-on-year in the second half of 2002, with core inflation at just 2% by the end of the year. “Dodge said a ‘vigorous recovery’ was underway in Canada, and suggested the central bank will continue to raise interest rates even as the U.S. Federal Reserve keeps rates on hold.”

At the same time, the U.S. dollar is slumping, particularly against the Yen. Uncertainty surrounding the U.S. recovery, and the resumption of terrorist fears has not been good for the greenback. But the Yen is rebounding, against both the dollar and the Euro on the hope that its latest recession is over.