Canadian Dollar at Parity with the US Dollar

[Higgly]

China has now announced that it is going to start moving its reserves out of the US dollar. Gold is up $20 this morning and the Dow is looking to open way way down.

Fasten your seatbelts, it's going to be a very bumpy ride.

[jdobbin]

Fasten your seatbelts, it's going to be a very bumpy ride.

That Bush is scary smart. Driving his dollar down to peso levels.

Charlie Cook today talks about the disconnect on the U.S. economy between Wall Street and Capitol Hill.

http://www.msnbc.msn.com/id/21662349/

Among elected officials in Washington, there seems to be little talk about the economy and hardly any mention that the housing sector is in a free-fall.

In New York, everyone is white-knuckled as fears over the economy and a mounting credit crunch are pervasive. What started as a subprime mortgage crisis has since spread far beyond the housing sector. That, combined with oil prices exceeding $90 a barrel, constitutes a two-pronged attack on economic expansion.

Many economists are now predicting and even 50-50 split on recession based on what is happening.

Edited November 7, 2007 by jdobbin

[jdobbin]

You're not the first person who has seen a price change and then worried about some impending doom. The world is constantly changing and it's normal that market prices will change too. The price of oil was as low as $10 per barrel less than 10 years ago. In real terms, the price of oil was about the same in 1980 as it is now. The Canadian dollar fell to about 65 cents US just a few years ago. Prices go up and down.

We don't live in a static world and it is illusory to believe that anyone can offer us some kind of permanence.

These are not exactly comforting words for a manufacturing sector that is basically dead in the water.

If I were a Canadian manufacturer, I'd shut down the plant and move.

[Argus]

These are not exactly comforting words for a manufacturing sector that is basically dead in the water.

If I were a Canadian manufacturer, I'd shut down the plant and move.

Some have already announced their intentions to do just that.

The amazing ignorance of Canadians is never more evident than here. I constantly see Canadians acting chauvenistic about the dollar, as if its rise is some wonderful indication of our manhood or something, and the US buck's fall is cause for snearing at them quite happily.

But the rise of the Canadian dollar is in no way helpful to us, and the fall of the US dollar does not harm them. It greatly helps their manufacturing sector, discourages people from buying imports, makes their exports cheaper and more appealing to foreigners, and encourages tourism - all the reverse of what it does for our manufacturing industry - most of which is geared to export. And then there's out tourism sector - what's left of it.

[Michael Bluth]

But the rise of the Canadian dollar is in no way helpful to us, and the fall of the US dollar does not harm them. It greatly helps their manufacturing sector, discourages people from buying imports, makes their exports cheaper and more appealing to foreigners, and encourages tourism - all the reverse of what it does for our manufacturing industry - most of which is geared to export. And then there's out tourism sector - what's left of it.

A rising dollar isn't all bad for the manufacturing sector.

Basically we are getting more money for the things we sell. That is not bad.

Manufacturers can invest in plant and equipment infrastructure at a lower price.

What's left of our tourism sector?

This gives us the opportunity to extend the Canada brand to travellers from other countries.

[jdobbin]

The amazing ignorance of Canadians is never more evident than here. I constantly see Canadians acting chauvenistic about the dollar, as if its rise is some wonderful indication of our manhood or something, and the US buck's fall is cause for snearing at them quite happily.

Canadian manufacturers can't invest in new technologies fast enough to adapt to 2 cent rises in the dollar overnight. When it goes up 7 to 8% in a month, it isn't a good thing. However, when you look at some of the news sites and even here in these forums, you would think that Harper engineered the whole thing and it is somehow a sign of his brilliance. Only the Harper cheerleaders think that Canada can adapt to change this fast and think that a 1% drop in the corporate tax is enough for these companies to be competitive in the export field.

[Michael Bluth]

Canadian manufacturers can't invest in new technologies fast enough to adapt to 2 cent rises in the dollar overnight. When it goes up 7 to 8% in a month, it isn't a good thing. However, when you look at some of the news sites and even here in these forums, you would think that Harper engineered the whole thing and it is somehow a sign of his brilliance. Only the Harper cheerleaders think that Canada can adapt to change this fast and think that a 1% drop in the corporate tax is enough for these companies to be competitive in the export field.

You reply directly on point to my post but won't quote it? Why is that?

The rise in the dollar has been fast, but it gives businesses new options for planning.

Who here said that Harper 'engineered' the rise in the dollar? The Conservatives have maintained sound fiscal and taxation policies. These policies, combined with weakness in the US economy have lead to the dramatic rise in the Canadian dollar.

[Wilber]

One area it has helped Canadians is in the price of oil. At the beginning of the year a 75 USD barrel of oil cost 86 CAD. Today a 96 USD barrel costs 88 CAD. As a result, our average pump prices have changed little in the past year. This will be of some help to business that have a big reliance on petroleum products.

[old_bold&cold]

The Canadian manufacturers can now invest in upgrades and robotics which then will make them capable of competing with even China and other low wage countries. Those who are not willing to do so, will probably die a slow death. The trouble with manufacturers are that they think that they must maintain all the pricing at inflated levels to compete, and are not used to having to do the thinking themselves. The biggest cost in all manufacturing is labour, and yes while it is nice when they can keep people working, but if it comes down to replacing unskilled labour with machines, then they need to do so quickly and then adjust prices and go compete in the world economy. I saw today in the paper where the USA trading will affect only 30% of our economy, and that is not that high a number. But if companies modernise and then take advantage of those savings they can compete with out much problems for many years.

The USA manufacturing will be already doing this and I am sure they are hurting more to get this as their dollar is tanking much faster then people foresaw it would. I do not think that the high dollar is the greatest thing, but it does have its good sides and bad. There are more good then bad when it comes to the high dollar. Those who think manufacturers will close and move, are not very good business people, and maybe they should go. Just do not come back looking for hand outs, and they may even find that duties may well apply to goods from the places they move to, making them more expensive then if they stayed. It should be on the minds of all those who are involved with foreign trade to see that soon the USA will become protectionist, and we with the freetrade agreement will then be in a better seat. Things are going to change and once Bush is gone, things will change fast. What was and is today will be longed for in a year or so to come. Right now Canada is along for the ride from the good seats, and we should make the most of it while we can.

[M.Dancer]

The loonie hit $US 1.10 this morning. We are definitely in uncharted waters here. If this keeps up for long, we will see major structural shifts in our economy. Oil is now at over $US98 per barrel, but that is largely a factor of the sinking US dollar. Much is made of the value of gold rising as the US dollar falls, but the truth is that every commodity rises when the US dollar falls because they are all priced in US dollars.

It is beginning to look like foreign interests are bailing on the US dollar in a big way. If that is so, we might see a meltdown in the US stock market in the not too distant future. Things could start to get real ugly.

I wonder when OPEC will peg the price of a barrel to the Euro? Consider the money tey are losing right now and ovber the past year....

[Michael Bluth]

One area it has helped Canadians is in the price of oil. At the beginning of the year a 75 USD barrel of oil cost 86 CAD. Today a 96 USD barrel costs 88 CAD. As a result, our average pump prices have changed little in the past year. This will be of some help to business that have a big reliance on petroleum products.

Yup, although I do expect to see a big jump in the price of gas this summer.

Part of it will be expected, it costs more to ship gas in the summer.

But part could be profit taking.

[M.Dancer]

Holy crap.....! If this happens and China dumps the market will be flooded with falling US bucks....which means the Loon will soar.....

BEIJING — China delivered a one-two punch to the dollar as a top lawmaker suggested a bigger role for the euro in its $1.43-trillion (U.S.) hoard of foreign reserves and a central banker said the dollar is losing its global currency status.

The euro hit a record high above $1.47 following remarks on Wednesday by Cheng Siwei, vice-chairman of the standing committee of the National People's Congress, China's parliament, pointing to diversification of the country's reserves.

“In terms of the structure of our foreign exchange reserves, we should take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies,” Mr. Cheng told a financial forum.

http://www.theglobeandmail.com/servlet/sto...7/BNStory/Front

The high flying Loon has been gaining altitude against both the Pound and the Euro

We have risen form .65 euros to near .73 this year and against the Pound from .44 to near .51 this year.

The Mrs. has been wanting to treat the kids to Disneyworld (Ack Spit!) but I think I made a credible argument this morning for visiting familiy in the UK....worse come to worse, there's Euro Disney..

[Michael Bluth]

Holy crap.....! If this happens and China dumps the market will be flooded with falling US bucks....which means the Loon will soar.....

The high flying Loon has been gaining altitude against both the Pound and the Euro

We have risen form .65 euros to near .73 this year and against the Pound from .44 to near .51 this year.

The Mrs. has been wanting to treat the kids to Disneyworld (Ack Spit!) but I think I made a credible argument this morning for visiting familiy in the UK....worse come to worse, there's Euro Disney..

High flying against the Yen as well.

Beginning of the year one dollar bought you 103.35 Yen. Now it buys you 126.42 Yen. Poor English teacher's. They could make more pumping gas here in Alberta...

[M.Dancer]

High flying against the Yen as well.

Grasshopper, what is the sound of one currency crapping?

..sorry, thought you said Zen

[msj]

Yup, although I do expect to see a big jump in the price of gas this summer.

Part of it will be expected, it costs more to ship gas in the summer.

But part could be profit taking.

Why does it cost more to ship gas in the summer?

I thought that the price of gas goes up in the Summer due to higher demand (driving vacations) that puts pressure on supply (as refineries do maintenance etc).

[Michael Bluth]

Why does it cost more to ship gas in the summer?

I thought that the price of gas goes up in the Summer due to higher demand (driving vacations) that puts pressure on supply (as refineries do maintenance etc).

Gasoline, like any liquid, expands when it is warmer. Tanker trucks can only hold a set volume of gas, which contracts when put into the cooler underground tanks at most stations. Hence they can't carry as much gas as they can in the winter.

Yes, you are correct that higher demand plays a role in gas prices going up in the 'driving season' as they call it in the bidness.

[Wilber]

Why does it cost more to ship gas in the summer?

I thought that the price of gas goes up in the Summer due to higher demand (driving vacations) that puts pressure on supply (as refineries do maintenance etc).

It probably doesn't cost more to ship gasoline in the summer. As MB says trucks are unable to carry as much by weight in warmer temperatures due to expansion but tanker trucks are diesel. The last few years the price of diesel has tended to go down in the summer and up in the winter due to heating oil demands. Around here the price of diesel has been running about .05 below regular gas during the summer and about the same above it during the winter. It's supply and demand.

[White Doors]

Thank you....I always chuckle a bit when reminded of that. Amen for the border!

But it's not true.

Toronto (metro) is more than an hour from the border and it makes up greater than 10% of Canada's population. Calgary is 3 hours from the Border... etc etc..

[Michael Bluth]

But it's not true.

Toronto (metro) is more than an hour from the border and it makes up greater than 10% of Canada's population. Calgary is 3 hours from the Border... etc etc..

I always wondered about that one. Throw Edmonton into the mix and between Edmonton, Calgary and T.O. you've got close to 5 million people more than an hour from the border...

[Wilber]

But it's not true.

Toronto (metro) is more than an hour from the border and it makes up greater than 10% of Canada's population. Calgary is 3 hours from the Border... etc etc..

The original and accepted observation was that 90% of the population lives within 100 miles of the border. I don't know how that somehow became 1 hour.

[M.Dancer]

But it's not true.

Toronto (metro) is more than an hour from the border and it makes up greater than 10% of Canada's population.

Well, maybe by moped...Niagara falls NY is about 65 miles away from Pearson Airport

[old_bold&cold]

First off the expansion and contraction of gasoline is not really a large factor in shipping the goods. It has less then 2% difference. In summer there will be a higher pressure for vapourization and the pressures in the tanks would get very high unless vented to some degree. So yes there would be more loss in eveporation in summer, but again we are talking about small numbers.

Now as for how close the majority of Canada's population is to the US borders go, there is well beyond 70% of the people in Canada that the border is only an hour drive away. By this I mean normal driving not counting rush hour traffic. All of southern, and eastern Ontario are well within one hour of the border. Montreal is pretty much one hour or less from the border and the same can be said for the lake shores of the great lakes. This will be at least 70% or more of Canada's population. So yes the high dollar will make for many going to the USA for things. I posted about the car hoist I bought and how I saved thousands by buying from the USA side. I can show you places in Canada who try to sell that same hoist for 4 times what I paid and it is exactly the same even the part number are the same. That is why I will not have any sympathy when these Canadian companies go out of business, as they should have never been allowed to be in Business in the first place.

The CDN hit $1.10 for a bit and then settled down to $1.07. If we look at this we will see that almost .04-.05 were from weakening USD and the rest really was from higher oil prices. China announced this week that it was converting some of its USD holdings because of the weak USD. This has also caused many other countries to lessen their holdings and as I predicted 8 months ago that once this starts it is very hard to stop. We will see $1.20 CDN by this june and it may even go higher. This is going to stay this way for well over a year or two and may well become the norm in many eyes, but the USD will again make some gains back, but not while Bush and company are in power. The phsycological effect of a new president and new policies will give it a bump back up, but depending on who the new president is and what policies he will take, will depend on whether that bump has staying power or not.

The USA has the ability to get its debt under control a lot quicker then most other countries, but it alos will have to suffer some to do this. I think the next president may well be willing to fix the mess, and start a new and build it even better and stronger, but that will take time and probably a couple different presidents, with the same view on policies. It is always easier to destroy then to rebuild.

For now I suggest that the people let the retaillers know that they are going to loose the christmas rush to cross border shopping, unless they adjust prices accordingly. It will not take long to see dwindling numbers if they do not act on things, and that will be a death knell of their own making.

[Michael Bluth]

First off the expansion and contraction of gasoline is not really a large factor in shipping the goods. It has less then 2% difference. In summer there will be a higher pressure for vapourization and the pressures in the tanks would get very high unless vented to some degree. So yes there would be more loss in eveporation in summer, but again we are talking about small numbers.

Fair enough. Say between expansion, contraction and evaporation you have a little more than 2 cents a litre added to the price of gas.

Now as for how close the majority of Canada's population is to the US borders go, there is well beyond 70% of the people in Canada that the border is only an hour drive away.

The 70% figure seems much more accurate. 90% within 100 miles of the border doesn't make sense.

The phsycological effect of a new president and new policies will give it a bump back up, but depending on who the new president is and what policies he will take, will depend on whether that bump has staying power or not.

He or she. Not to be politically correct, but Hilary does have a realistic shot at winning. It's a little counter-intuitive but I think if a Dem wins it will help the dollar more than a Republican winning.

I think the next president may well be willing to fix the mess, and start a new and build it even better and stronger, but that will take time and probably a couple different presidents, with the same view on policies. It is always easier to destroy then to rebuild.

I don't think it will take that long at all. Fiscal pressures is the greatest argument for getting out of Iraq ASAP. Take away the cost of the war and it won't be that difficult to balance the US budget again. Which probably adds support to why the exchange markets would prefer a Dem to replace GW.

Edited November 8, 2007 by Michael Bluth