Loonie closes above 92 cents US

The Canadian dollar closed above the 92-cent US level on Tuesday as it traded in territory it hasn't seen since early October 1977.

Inglobal currency markets, the looniefinished at 92.08 cents US.In earlier trading, it went as high as 92.34 cents US.

Amid thin trading on Monday, the dollar broke through the 92-cent US barrier for the first time in 30 years.

The loonie has gained more than 50 per cent since its record low of 61.79 cents US in early 2002.

Economists say the mainreason for the loonie's recent strength has to do with the Bank of Canada and expectations that the central bank will be raising interest rates.

A strong retail sales report last Friday was the most recent piece of Canadian economic data to highlight that the central bank may need to raiserates as early as this summer.

Other reasons for the dollar's strength include persistently high commodity prices, the spate of takeovers of Canadian companies by foreign groups and an American dollar that is weakening against many foreign currencies.

In addition, monthly inflation figures showed the core rate of inflation which excludes the most volatile items rose to 2.5 per cent in April. That's the highest in more than four years.

The Bank of Canada's next decision on interest rates is slated for May 29. The overnight rate what banks charge each other for overnight loans has been steady at 4.25 per cent since May 2006.

"Look for the Bank [of Canada] to ramp up their concerns on the inflation front next week, but also to express some keener interest in the [Canadian dollar],"BMO Capital Markets economist Doug Porter said in a morning note.