How 'petro-currency' became 'Bay-St. buck' As currency tensions mount across the globe Wednesday, a new report looks at what’s driving the strength of the Canadian dollar, and how it may have moved from a "petro-currency" to the "Bay St. Buck." The report by Philip Cross for the Macdonald-Laurier Institute comes as Canada’s dollar continues to run above parity with the U.S. currency and is projected to hold at that level, give or take a few cents, at least through the end of next year. It also comes amid talk of a "currency war" as the strength of some currencies threaten the exports of their countries. The strong dollar has been a concern in Canada, among both policy makers and the country’s exporters. The loonie has often been referred to as a petro-currency because of Canada’s resource-fueled economy. It traditionally moves in tandem with oil prices because, noted senior currency strategist Camilla Sutton of Bank of Nova Scotia, both are sensitive to the same drivers, such as global economic growth and the fortunes of the U.S. dollar. She agreed the long-standing correlation has broken down temporarily. The study on so-called Dutch Disease by Cross, released by the think tank, notes how Canadian oil prices lag those of world benchmarks, but how the dollar has been propped up by foreign money flooding into the country by the hundreds of billions. Many observers have noted this development, driven by Canada’s economic outlook, the strength of its banks and the fact that it remains one of the few countries to still boast a triple-A credit rating. Since the early days of the financial crisis in 2007, says Cross, formerly Statistics Canada’s head economic analyst, foreign investors have gobbled up almost $275 billion in Canadian bonds. Compare that to a decline of $66 billion in the five years since the loonie began climbing after 2002. "The conclusion is that the recent strength of the exchange rate no longer can be attributed solely to commodity prices, and therefore resource prices cannot be singled out as the source of problems in Canada’s manufacturing sector," he added. "Instead of a 'petro-currency,' we may now have the 'Bay St. Buck.'"