Canadian Currency make history

古月照今城

Loonie shoots for parity with U.S. on Fed rate cut, oil prices, up 1.36 cents
- W8 C" F- y0 _+ kTue Sep 18, 7:39 PM
Julian Beltrame Email Story IM Story Printable View
' E; D- i, i8 tBy Julian Beltrame

7 ?* F$ w; z3 fOTTAWA (CP) - The Canadian dollar took a giant leap toward reaching parity with the American buck on Tuesday after the Federal Reserve in Washington surprised the market by cutting interest rates half a percentage point, and world oil prices set a new high.

. e+ r. H1 x# v4 jThe double whammy of lower U.S. interest rates and a new record price for oil of more than US$82 per barrel sent the loonie rocketing upwards. The currency hit as high as 98.74 cents US before settling down to 98.64 cents at the close, up 1.36 cents from Monday. The close is the loonie's highest since January 1977.

$ m6 V+ `1 l0 n1 q# w- e- q"At this level we'll see parity simply based on people's expectations that it'll hit parity," said Dale Orr, managing director of Global Insight Canada.
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Others, including some foreign exchange analysts in the U.S., have predicted the Canadian dollar could reach as high as $1.05 US if the weakness in the American economy deepens.
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The high dollar may make U.S.-made goods cheaper to buy in Canada, and travel to the Florida a bargain for Canadian snowbirds. It will also increase the number of cross-border shopping trips as thousands of Canadian consumers travel across the border to buy U.S. clothes, shoes and electronic gear that will suddenly be cheaper for their pocketbooks.

0 d* [5 r) c: H* r3 T$ mBut it will be cold comfort to domestic manufacturers who have to try to sell goods south of the border at a discount or have been priced out of U.S. markets because of stiffer competition from American rivals.

Canadian Auto Workers economist Jim Stanford warned the sector will lose hundreds of thousands more jobs if the dollar remains at current levels. He said the only manufacturers prospering at the moment are those directly tied into the Alberta oil sands.

"There is no silver lining in this cloud, believe me," he said. "I think the Bank of Canada should look seriously at what the Fed is saying and it should match the cut to support our manufacturing. Oil is very valuable today, but there's no way Canada can succeed in world trade 10 or 20 or 30 years from now if we sit back and watch our whole manufacturing base wither away."

/ G! `$ \4 K9 pStanford said Canadian manufacturing hit its peak in 2002, when the Canadian dollar was at near record lows, adding that that is was no coincidence. Since then, the sector has lost about 400,000 jobs, he said, most in blue-collar communities in Ontario and Quebec.
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The Fed action had been anticipated for weeks, but few expected the central bank to cut rates so deeply.

7 p- c6 ]) d+ [* u+ o0 ~The Fed's bold action signalled that it believes the U.S. housing housing slump and subprime mortgage turmoil has the capacity to spread throughout the American economy, possibly pushing it into a recession. The half-point cut was double the market's expectation, and cut its key rate to 4.75 per cent.
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That narrows the spread considerably between the U.S. and Bank of Canada's 4.5 per cent rate and makes investment in Canada more attractive.

"The higher Canadian dollar will constrain exports to the U.S. but there's good news here too," said Bank of Montreal senior economist Sal Guatieri. "The lower U.S. interest rates will support the U.S. economy and provide some offsets to our exports."
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Few expect that Canadian bank to move in tandem with the Fed on interest rates this year because the Canadian economy is outperforming its larger neighbour, and inflation pressures remain strong.

Earlier this month, Bank of Canada governor David Dodge signalled his neutral stance on interests rates by saying the risk of a downturn and to higher inflation was about equal. He called Canada's interest rate level appropriate at the moment.
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"The bank is on hold for the next few meetings at least," said Darcy Briggs, a portfolio manager with Bissett Investments in Calgary. "They are watching what's happening globally - the Fed has cut rates, the Bank of England has stepped in to help a mortgage lender and stem a run on a bank - so they'll be watching events closely but stay on the sidelines."
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That may not be the case for U.S. rates. Orr believes the Fed will cut rates again before the year is out, but doubts that will have a dramatic impact on the already strong dollar.
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# y9 u5 |- f% k4 G* mWhile the U.S. interest rate cut has attracted most of the attention, Orr says the dollar's current flight is based as much on the record price for crude oil as the Fed's action. If oil remains high, he said, so will the dollar.
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( C5 O, ?, u. wBut CAW president Buzz Hargrove says Canada's government and central bank have to take action.
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"The Bank of Canada and the federal government must not sit idly by while our manufacturing sector is hollowed out and tens of thousands or more jobs are lost," said Hargrove.

ComfortHardwood

加拿大这么搞可就危险了。