The Canadian dollar briefly breached the 99-cent US mark in overseas trading Wednesday, inching closer to parity with the U.S. greenback.

But the rise in the loonie was short-lived. The release of the Consumer Price Index (CPI) for Canada Wednesday morning slowed the dollar's ascent, bringing it back below the 99 cent mark.

The loonie drifted down 0.14 cent to close at 98.5 cents US on Wednesday.

The CPI indicates that the Canadian economy is not overheating and that an interest rate hike has become less likely in the near future, reported the Business News Network's Michael Kane. That concerns some currency traders, Kane says.

"It doesn't scare them away, but it makes the currency look less attractive to somebody who's trying to make money on it," told CTV Newsnet this morning.

Recent gains, however, had the loonie set a 30-year-high Tuesday, closing at 98.64 cents US.

At its peak, the dollar went as high as 98.74 cents Tuesday afternoon.

Economists say it may only be a matter of days before the loonie reaches parity with the American dollar.

"You got the two ingredients, commodity prices and interest rate differentials, both going in the dollar's favour," said Don Drummond, chief economist for TD Bank speaking to CTV Newsnet Tuesday evening.

The real surge Tuesday came after the U.S. Federal Reserve cut its key funds rate half a point, to 4.75 per cent, to curtail a possible recession.

The move was double the quarter point economists were expecting.

Meanwhile, the strong loonie is expected to make American-made goods cheaper to buy in Canada and travel to Florida a bargain for Canadian snowbirds.

However, the rise of the dollar could also negatively impact domestic manufacturers who will have to try to sell goods south of the border at a discount.

Canadian Auto Workers economist Jim Stanford warns the manufacturing sector will lose hundreds of thousands of more jobs if the dollar remains high.

He is calling on the Bank of Canada to match U.S. cuts to interest rates.

With files from The Canadian Press