Canadian Dollar Gaining Reserve Status

[Smallc]

The Australian and Canadian dollars are becoming reserve currencies for central bankers seeking alternatives to deteriorating government credit quality in Europe, the U.S. and Japan.

“They’ll gain an increasing place in reserves because of diversification,” European Central Bank governing council member Christian Noyer said in a June 16 interview with Bloomberg News in Paris.

Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. currency and euro, Alexei Ulyukayev, the first deputy chairman of the nation’s central bank, said in an interview in Moscow on June 15. The International Monetary Fund may add the Aussie and loonie to a basket of currencies it uses in transactions, strategists at UBS AG, the world’s second-largest foreign-exchange trader, predict.

Story by Oliver Biggadike

Yet more evidence of Canada's growing influence and our strong economic system. Thank goodness for our (overall) good federal and provincial government management over the last 20 years.

[ZenOps]

Yet more evidence of Canada's growing influence and our strong economic system. Thank goodness for our (overall) good federal and provincial government management over the last 20 years.

Nah. Its all about the gold.

[Machjo]

Yet more evidence of Canada's growing influence and our strong economic system. Thank goodness for our (overall) good federal and provincial government management over the last 20 years.

Scary. When the US dollar became a reserve currency for the world, it gave the US an advantage in that by having everyone buying the US dollar, the US could print more without fear of excessive inflation, thus giving it its false illusion of wealth over all these many years. The problem of course is that once so much of that money is sitting in reserve, it also makes the currency vulnerable to a sudden stampede if confidence is lost. The US is in that position now, ever so vulnerable to a stampede away from its currency. If it's lucky, countries will dump it gradually, thus allowing the US to deflate gradually via tax increases and spending cuts for many years to come. But what should happen if everyone stampede away from the US dollar? Then the US would be in a world of hurt.

I would hate to see Canada get tempted into the same trap, attracted by the allure of being able to print more currency without inflation since the world would be buying our currency. Again, it would make us ever more arrogant over the years, cause us to live well beyond our means without even realizing it, and then what would happen if many years later the world then decides to dump the Canadian dollar?

I don't mind a strong currency as long as it's real strength and not the illusion of strength brought on by a reserve currency. I realize there is not much Canada can do to avoid this. If the world wants to buy our currency, how will we stop it from doing so? However, I think Canada should express its wish that the Canadian dollar not be used for this purpose. Granted it's no guarantee other countries would listen, but then Canada could try to offer an alternative, suggesting for instance that countries turn to gold instead of another country's currency. Because just as the uS is now had by the nuts with its reserve currency, I'd hate to see Canada go down the same unsustainable path.

[maple_leafs182]

Nah. Its all about the gold.

and silver...

[Yesterday]

Yup, I hope the basket doesn't tip.....

[Wild Bill]

and silver...

Silver, and gold. Silver and gold. Why do I keep thinking about an elf from the North Pole who wants to be a dentist?

[Jack Weber]

Silver, and gold. Silver and gold. Why do I keep thinking about an elf from the North Pole who wants to be a dentist?

"Finish the job,or,YOU'RE FIRED!!!!"

By the way,are you a big Burle Ives fan?

Edited June 22, 2010 by Jack Weber

[Yesterday]

and silver...

Uranium, potash...diamonds and for Shore...gold.

[geoffrey]

Kind of a silly comment.

Yes, central banks will hold Canadian dollars.

No, the Canadian dollar is NOT gaining reserve status.

Just because a central bank holds loonies doesn't mean the Canadian dollar is going to ever be a substantial reserve currency. The reality is that our debt markets are far too illiquid and small for there ever to be consideration to moving any major money into the loonie.

Compare how many outstanding US t-bill/bond issues there are versus Canadian $ bills/bonds and the volume traded in each and you'll understand. Central banks don't hold CASH, they hold debt. There isn't enough Canadian debt!

Banks hold Aussie and Canadian dollars for balancing purposes, we are big exporters of resources, most countries are importers. Keeps currencies stable in a roundabout way through times of commodity volatility.

USD/EUR/GBP/YEN/CHF will be reserve currencies. No one else has the depth to challenge that. Especially not the meagre amount of Canadian debt product in the markets.

Gold is a reserve instrument, arguably a currency, that will have more influence in the future as well.

[Yesterday]

Kind of a silly comment.

Yes, central banks will hold Canadian dollars.

No, the Canadian dollar is NOT gaining reserve status.

Just because a central bank holds loonies doesn't mean the Canadian dollar is going to ever be a substantial reserve currency. The reality is that our debt markets are far too illiquid and small for there ever to be consideration to moving any major money into the loonie.

Compare how many outstanding US t-bill/bond issues there are versus Canadian $ bills/bonds and the volume traded in each and you'll understand. Central banks don't hold CASH, they hold debt. There isn't enough Canadian debt!

Banks hold Aussie and Canadian dollars for balancing purposes, we are big exporters of resources, most countries are importers. Keeps currencies stable in a roundabout way through times of commodity volatility.

USD/EUR/GBP/YEN/CHF will be reserve currencies. No one else has the depth to challenge that. Especially not the meagre amount of Canadian debt product in the markets.

Gold is a reserve instrument, arguably a currency, that will have more influence in the future as well.

There is going to be a redefining of the member states of the IMF next year in March I believe. I've heard some speculation that the US might lose it's top position. What do you think? Yes/no?

I had also heard that it is export that determines the validity of a currency holding a reserve spot. I had also heard some speculation that the resource base here in Western Canada is going to be a boon for our dollar when it cracks open. Does this make any sense? It's hard to know what to believe.

I contemplate the export comment in regards to the push against China to reduce its exports...

[Moonbox]

There is going to be a redefining of the member states of the IMF next year in March I believe. I've heard some speculation that the US might lose it's top position. What do you think? Yes/no?

Geoffrey seems to know more about this sort of thing than I do but I can't really see what other currency would take top spot over the US. The Euro region's debt problems are every bit if not bigger than the US, the British are no better. Concerns that the Chinese manipulate their currency will probably rule it out as the #1 contender and as far as the Yen is concerned..well I actually don't know much about it but I doubt it.

[Yesterday]

Geoffrey seems to know more about this sort of thing than I do but I can't really see what other currency would take top spot over the US. The Euro region's debt problems are every bit if not bigger than the US, the British are no better. Concerns that the Chinese manipulate their currency will probably rule it out as the #1 contender and as far as the Yen is concerned..well I actually don't know much about it but I doubt it.

Hi, I hear the Euro is up a little....today's news. Personally even though my knowledge is sketchy, I think agree with Geoffrey about Canada's ability to meet the requirements(either debt or export) at least for a few more years...if I've misunderstood those requirements and debt is what drives the positioning then I hope we never get there.

[Remiel]

There is going to be a redefining of the member states of the IMF next year in March I believe. I've heard some speculation that the US might lose it's top position. What do you think? Yes/no?

I do not know what geoffrey thinks, but at this point I would not put to much credence in that. The head of the IMF is an American and the head of the World Bank is a European, because that is what they agreed to when they started those institutions. By extension, a reordering of the top echelons of the IMF seems like it would also make the ordering of the World Bank up for grabs.

[Yesterday]

I do not know what geoffrey thinks, but at this point I would not put to much credence in that. The head of the IMF is an American and the head of the World Bank is a European, because that is what they agreed to when they started those institutions. By extension, a reordering of the top echelons of the IMF seems like it would also make the ordering of the World Bank up for grabs.

I have to wonder about this too. In my thoughts, this IMF reset should coincide with a US dollar rest if true and both be revalued to something that is asset backed in which case the standings could be likely to stay the same just with different values. However, with Canada's growing popularity and possible coming resource boon our position could change.

Personally even though my knowledge is sketchy, I think agree with Geoffrey about Canada's ability to meet the requirements(either debt or export) at least for a few more years...if I've misunderstood those requirements and debt is what drives the positioning then I hope we never get there.

I wonder if the export I heard referred to is the export of government debt? In which case Geoffry makes good points about our current situation. I hope we never get there.

Edited July 10, 2010 by Yesterday

[ZZelda]

Way to go P.M. Harper on making the Canadian $$ worth somrthing. Keep Up The Good Work.

[August1991]

Yes, central banks will hold Canadian dollars.

No, the Canadian dollar is NOT gaining reserve status.

Just because a central bank holds loonies doesn't mean the Canadian dollar is going to ever be a substantial reserve currency. The reality is that our debt markets are far too illiquid and small for there ever to be consideration to moving any major money into the loonie.

Geoff's post is so obvious that I chose not to respond when I first saw it, and I'm only responding now because it popped up on the Active List.

There are some 6 billion people in the world. These individuals use - and hold - a variety of currencies for various personal reasons. (Some trade, some travel, some want to save safely.) Following the desires of their customers, private (and state) banks hold various currencies. In essence, a reserve currency is a democratic choice.

Among the 6 billion people in the world, I see no reason for anyone to change their desire to hold or use Canadian dollars. So, is the Canadian dollar a reserve currency? Obviously not.

Now then, if Canada were to change its immigration laws and allow anyone to come and live here, the Canadian dollar could possibly become a reserve currency. I have no doubt that, in such a scenario, many foreign banks would want to have Canadian dollars in their vaults.

Edited July 15, 2010 by August1991