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Loonie levels off after dramatic rise in morning
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CTV.ca News Staff
Date: Wed. Sep. 19 2007 5:25 PM ET
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
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I applaud the budget, even though Health Care and education may stay unscathed. Sadly this cannot last and I worry to later this year where cuts will become enviable. If anything, this provides the Wildrose Alliance plenty of ammo when an election is called.
Please Add Comments( )
Scott
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gord
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Dennis
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Too bad for the manufacturing sector, great for the rest of us.
Gerald Skowronski
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Denis
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WJ
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Mike
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Now the average Canadians have the opportunity to travel to the U. S. A. for those sunny destinations.
Maybe the Autoworkers union and all the other unions should use some of there Bank accounts that they have stuffed the workers money in and help save the unionized jobs instead of always putting their woes on the backs of the hard working non unionized workers in Canada. It seems that for years they have had a low dollar to help them bank large amounts of union dues. Hope you kept it for the unionized employees they will need it.
This is for all those hard working people who work hard every day without a union and still seem to get by.
Yes that sunny sunny south this winter.
Ed
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Canadians are more then capable. Unions and Liberal cradle to grave socialism has sucked the competitive spirit from this country.
Patric
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Matteo
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Steve
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Until the late 70s, the Canadian dollar has always been with 10% of the US dollar and our economy managed to survive and flourish during those times.
Any industry that has been artificially kept alive solely on a devalued currency deserves to have the plug pulled.
George Dryburgh
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Nearly 300,000 job losses since the dollar rise began is a far cry from a few lay-offs.
Stanford is right! We need to match the US interest cuts.
Parity means nothing if we're all out of work.
FZ
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Nick T
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Wake up Canadian retailers! Do yourselves a favor and start dropping your prices, or start losing money!
Narin
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What nonsense! In his case why shouldn't we adopt the USD since we let the FED to control all economical decisions. Then we don't need the Bank of Canada, and we will save lots of money.
In my opinion, I think we should not follow the FED like the sheep, we have our own interest to protect.
GJ
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JF
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devki
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John
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Krista
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We actually planned a weekend in the US and the issue of parity didn't come into play, but it seems like really good timing on our part. I don't have to save so much money so I can afford to eat! Maybe a few Christmas gifts will be from the US as well!
Krista
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Donovan
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This adds up to Canada's manufacturing sector becoming frightened, lazy and complacent. Look in the mirror and you'll see the real maker of your demise.
Liberals Suck
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Marty
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The manufacturing sector and the forestry sector are suffering because of the high currency and they are finding it very difficult to compete with the markets in places like Asia as it is. I think it is very selfish of Canadians who only think of their own individual benefit rather than how this is affection Canada as a whole. I suppose there are a few people would like to see the lower middle class sink below into the lower class and make minimum wage. I see one person who complains about some people who make more the a college educated person. Maybe that is true, but do you feel they should be without a job just because you have a higher education?
Liberals and the Leafs suck !!
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Steve
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The vast majority of goods sold in this country come in to the N.A. market through the U.S. and so retailers still have to pay high importation costs - shipping, duty, GST (claimable yes, but it's still an out of pocket expense), and brokerage fees.
My prices have come down because of the loonie, but my wholesale cost of goods is still as much as 50% higher than my American competitor.
Asking retailers to lower or match U.S. prices is putting the cart before the horse. Support Canadian businesses so that we can purchase the volume of product necessary to bring costs down and THEN we can lower prices. I've still got seasonal inventory that I paid a 20%+ exchange on.
If you feel that Canadian prices are still too high, then feel free to cross the border. Just don't whine to me when it breaks because the money you saved came directly out of my pockets and those of my employees.
John.
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That was a conservative government;and now we see that again,a very strong dollar under the conservetives.
John T
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This policy, instituted by the PCs under Mulroney and implemented by Chretien's Liberals under finance minister Martin's able guidance has led to a success unparalleled in the OECD.
You see, in the first place, Conservatives and Liberals can work together for the good of Canada, and in the second place the decision by the BoC to raise or lower the interest rates is independent of what the public calls for or what the Fed does.
On the first point, we really should try to avoid the ugly partisanship that is now so evident in the US, and on the second, just leave the BofC to do its thing. If it ain't broke, don't fix it.
As far as parity goes, yeah, we have to step up and increase our competitiveness and productivity. Now we have some incentive.
Mike
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Canada has nothing to do with this though, it's American buck keeps falling, that's what it is.
Richard - Proud Canadian
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Our manufacturing industry will suffer; hopefully this sector of our diverse economy will take advantage of this hardship to become more competitive. And diversify – why do we have to export ~75% of our goods to the USA?
The rise in value of the Canadian dollar did not happen over-night (was it not 5 years ago that a +40% differential existed?). It is a sign that overall, we (Canadians) are doing something right.
Nick T
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I will GLADLY travel 45 minutes to cross the border to buy goods and save myself hundreds of dollars. (example: bought sheet set for my bed recently. cost in Canada was 325$+tax. Cost in the US was 120$ for that same set). If it cost some Canadians their jobs, then the people they have to blame in that situation are the ones driving the consumers to do so (the ones setting the prices).
Marc
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Alistair McLaughlin
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Rupert S. Lander
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In fact, against most currencies the dollar has only made modest gains. What we are seeing is a weakening U.S. dollar, but since our exporters have significantly diversified their customer base in the last five years that carries far lighter consequences for us than it used to.
The CAW may be hurting, but that is because unlike most other manufacturers they sell mostly to America and the U.S. economy is weak right now. The saddest part of Hargrove's rants is that while weakining the dollar now would an utterly reckless policy heat up the already hot economy to melting point, it would also hardly help his union. It is a testament to the selfishness of Hargrove and Stanford that they don't seem to understand that there is in fact a labour shortage in many provinces - even Ontario is currently experiencing unemployment rates lower than they've been in decades. All they care about is that they are losing union dues, and if they could they would send the rest of the economy to hell in order to protect those. There is much more to our economy than the auto sector, out nation's economy no longer lives or dies on the fortunes of the CAW (if it ever did).
Our economy is strong, despite the concurrent strength of our dollar. And that's a good thing. The CAW's position is weakening relative to the national economy. And that's a good thing too - unless your name happens to be "Buzz Hargrove" or "Jim Stanford." Let's save a cut to the dollar's value for a time when it might actually be needed by a few more prople than the few arrogant labour leaders who rely solely on CAW union dues for their fat paycheques.
Brian
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