NEW YORK (TheStreet)- The Canadian dollar briefly reached parity with the U.S. dollar on Tuesday, highlighting the steady run upward that CurrencyShares Canadian Dollar Trust (FXC) has taken so far this year.

The last time the Canadian dollar, dubbed the loonie, was at equal value with the U.S. dollar was back in July of 2008, after trading there since the end of 2007. That previous occurrence was the first time since the 1970s that the two currencies traded at parity.

FXC, which tracks the progress of the Canadian Dollar against the U.S. dollar, has advanced 4.5% so far in 2010. This progress comes on top of gains of 15.2% for the currency fund in 2009.

The strength of the currency has helped lift the performance of Canadian equities. While the Canadian equity market (S&P/ TSX Composite) trails the U.S. stock market (S&P 500) in local currency, the most popular ETF providing exposure to companies from Canada, iShares MSCI Canada Index Fund ( EWC), is up 7.8% year to date, which puts it ahead of the 6.2% advance in SPDR S&P 500 Index ( SPY).

Spurring the rise in the value of the loonie against the U.S. dollar is also the perception that the Bank of Canada will raise interest rates before the U.S. Federal Reserve.

Canada's economy is also coming out of the recession stronger than the U.S. since its banking sector was less damaged. There were no major collapses of banks in Canada and the government did not need to bail out any institutions.

However, given the serious level of historical resistance in the area of parity between the two currencies, investors may not find much more room for gains by investing in FXC right now.

A better way to play the strength of Canada's economy would be to use EWC. The fund features companies that produce what a world economy in recovery mode will continue to demand. Materials companies make up 19% of the fund and energy companies comprise 25.8%.

Canada is a large trading partner with the U.S. largely due to its proximity and favorable trade policies, so the stronger loonie is unlikely to cause a significant drop in trade.

Further making EWC appealing is its 34.7% allocation to financial institutions, some of which have regained the ground they lost in share value during the recession. Although there may be more room for upside with American banks, which largely still have not regained all the value lost in the recession, the strength of Canadian banks help make EWC less of a risky investment.

Investors have another option if they want to load up on energy companies from Canada: the Claymore/SWM Canadian Energy Income Index ETF ( ENY). This fund provides exposure to 24 holdings, all of which are in the energy sector, and has a yield of more than 3%.

Finally, for a more aggressive play, investors can consider IQ Canada Small Cap ETF ( CNDA). The fund has a large focus on the country's mining and resources sector, which is seeing high demand as the world economy seeks to fuel its recovery and is part of the reason for the loonie's advance. The fund allocates 50.9% to materials, 17.3% to energy, and only 7.5% to financials.

However, CNDA has only been around since March 23 and its average daily volume is about 18,600 shares. If interest in this fund picks up and volume moves higher, it could become a fund worth adding to a portfolio, but right now the volume is still too low.

I would recommend that investors take the strength in the loonie as a vote of confidence on the Canadian economy's outlook. However, instead of playing the currency with FXC, stick with the most liquid and most popular Canadian ETF: EWC.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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