Loonie holds above $1.07 US

The Canadian dollar held firm above$1.07 US Monday, maintaining its grip on the modern-day record it set last Friday.

The loonie was quoted at $1.0718 US at the close of trading, up 0.14 cents US. During earlier overnight trading, it reached$1.0746 US the highest level since the dollar was allowed to float in 1950.

Monday's gains came despite a fall in the price of oil, which currency markets typically look to asa barometer for the loonie. Oil futures were down $1.95 to close at $93.98 USa barrel in New York trading.

Economists at several big banks are forecasting the Canadian dollar will hit $1.10 US by the first quarter of 2008, noting that the weak American dollar and strong commodity prices aren't going away any time soon.

Some see no near-term catalyst to reverse the loonie's lofty flight higher.

"After an unbroken period of advances, one has to believe that at some point the mighty bird will at least pause for breath, if not take a temporary step back," said a commentary from BMO Capital Markets Monday. "However, the conditions for a lasting turn just don't seem to be in place yet (nor perhaps anytime soon)."

But some market watchers, such as Gavin Graham of the Guardian Group of Funds, say with the loonie rising by almost two cents in one day as it did last Friday a sharpreversal could be just around the corner.

"We would not be surprised at all to see it back at parity within a few weeks, because what [a two-cent rise in one day] means is everybody and their grandmother is now long the Canadian dollar and short the U.S. dollar, and that only ends one way: with a big reversal," Graham told CBC News.

The high loonie has sent many Canadians on cross-border shopping trips as they take advantage ofthedollar to stock up ongoods priced in U.S. dollars.Many retailers in Canada have responded with public announcements of broadprice cuts in the last few weeks to try to keep customers at home.