Believe it or not, but "cheers erupted on the foreign exchange desk at Scotia Capital" yesterday when the loonie (that's what us Canadians call our dollar) first traded at parity with the U.S. dollar -- for the first time in 31 years. I'm sure the scene was similar in other banks across Canada. As is almost usual, though, the Americans beat us to it as they are the ones who actually did the trade, specifically Citigroup's New York currency desk. Oh, well.

The Canadian dollar hit its historic low of 61.79 cents (U.S.) on Jan. 21, 2002, but has gained more than 16% this year and almost 8% since mid-August alone. The True North is indeed strong. But is this good for Canada? For the U.S.? Canadian exporters are no doubt suffering, American ones will be doing better following the fall of the U.S. dollar. Tourism will likely improve in the U.S., but suffer in Canada. And consumers? Canadian consumers aren't happy, but I'm sure U.S. outlet malls along the Canadian border are quite happy. It used to be the other way around.

Analysis provided by Theflyonthewall.com:

The media is starting to report again that the weakening of the U.S. dollar means bad things for the US economy. On Monday, the dollar continued its decline against other major currencies, at $1.31 Euro and $1.93 British pounds. It must be the inherently bad U.S. trade deficit that is causing the decline in the dollar, journalists and network commentators suggest. Last week, the entire CNBC Squawk Box team was squawking off about the trade deficit with China having a deleterious impact on the United States.

CNBC's bantering comes as U.S. Treasury Secretary Paulson and U.S. Federal Reserve Chairman Bernanke are about to travel to China to persuade officials to let the yuan currency further appreciate versus the US dollar.

While the Bush Administration is now a lame-duck presidency, Paulson and Bernanke might still have success as China officials will most likely want to avoid a battle with the new Democrat-led U.S. Congress with Sen. Charles Schumer (D-New York), Congressman Barney Frank (D-Massachusetts), and Congressman Charles Rangel (D-New York) taking charge of policy.

Look for China to agree to a continued slow and steady appreciation of the yuan versus the U.S. dollar to avoid any nasty retaliation from the new U.S. Congress.