Spunout
11-04-2004, 09:01 AM
Basically, this means that all the Canadians are going to hire American nannies, gardeners, McDonald's cooks, etc. Boy, it is great living beside a second-rate democracy. Okay, we'll lose some manufacturing capacity to the deep south but who cares! Look at the great gardens and cheap labour we'll have!
The Economy is on the march!
The Canadian dollar topped the 83 cent (U.S.) mark Thursday, as its U.S. counterpart continued to stumble on concerns about that country's growing budget and trade deficits.
The move put the loonie squarely at the Organization for Economic Co-operation and Development's “purchasing power parity” level of 83 cents, suggesting further gains could make the value of the dollar an even more crucial issue in terms of this country's global competitiveness.
Essentially, the OECD's parity level compares what a currency will buy in comparable goods in each country, taking into account price differences and inflation levels. It offers a frame of reference in which to see how close a country's currency is to so-called fair value.
“For years we've remained competitive by having a currency that was pretty well below fair value,” BMO Nesbitt Burns senior economist David Watt said. “It helped keep our exports competitive. Now the Canadian dollar's gone as a competitive aid. It brings up a lot of implications for the Canadian economy.”
In morning trading, the Canadian dollar reached a fresh 12-year high of $83.04 cents (U.S.). The dollar hasn't topped 83 cents since September, 1992. As the session progressed, the loonie pulled back somewhat to 82.85 cents, though it remained above Wednesday's closing price.
Issues that surfaced last year — when the dollar rose more than 20 per cent against the greenback — now become more crucial as the loonie breaches the OECD's parity level, Mr. Watt said. They include improving productivity as a means of remaining competitive.
“Even last year, when the Canadian dollar was going up and there was talk about the need to get more productive, it wasn't really hitting home as much, because the Canadian dollar had been so far undervalued,” he said.
“Now it's getting to the point where you can't ignore it. You no longer have it as a source that is going to help make you more competitive relative to exports from other countries in the world.”
For example, Mr. Watt said, China is now moving up the “value-added food chain” in terms of exports to the United States, meaning any country that also exports to the U.S. has to try to keep step.
“In Canada, we were sort of insulated from that because of a cheap dollar,” Mr. Watt said. “Now, just as China is becoming more aggressive, we're losing that crutch.”
BMO Nesbitt Burns' current target for the loonie sees it as high as 85 cents (U.S.) by June.
On Wednesday, the loonie managed the biggest increase against the U.S. dollar of 14 major currencies, climbing 1.3 per cent to finish the day at 82.71 cents.
The gains came as the U.S. dollar faltered on world currency markets despite the win by incumbent President George W. Bush as traders worried about the size of the twin U.S. trade and current account deficits and the potential impact for the world's biggest economy.
In early going Thursday, the U.S. dollar was within half a cent of a record low against the euro. It also lost ground against the yen and was at an eight-year low versus the Swiss franc.
The greenback's decline surprised many who had speculated that a Bush win would result in a rally for the flagging U.S. dollar. Some subsequently suggested that mounting worry about the imbalances in the U.S. economy had ultimately taken hold and suggested that the U.S. dollar would have lost ground regardless of who ultimately took office.
“The sell-off of U.S. dollars is at least partly based on fears that the Bush administration sees a weak exchange rate as a solution to the country's ballooning trade deficit,” Royal Bank of Canada economist Carl Gomez said.
The U.S current account deficit — the broadest measure of its dealings with the rest of the world — was at an annual rate of $665-billion in the second quarter, which was 5.7 per cent of U.S. gross domestic product.
http://www.theglobeandmail.com/servlet/story/RTGAM.20041104.wdoll1104/BNStory/Business/
The Economy is on the march!
The Canadian dollar topped the 83 cent (U.S.) mark Thursday, as its U.S. counterpart continued to stumble on concerns about that country's growing budget and trade deficits.
The move put the loonie squarely at the Organization for Economic Co-operation and Development's “purchasing power parity” level of 83 cents, suggesting further gains could make the value of the dollar an even more crucial issue in terms of this country's global competitiveness.
Essentially, the OECD's parity level compares what a currency will buy in comparable goods in each country, taking into account price differences and inflation levels. It offers a frame of reference in which to see how close a country's currency is to so-called fair value.
“For years we've remained competitive by having a currency that was pretty well below fair value,” BMO Nesbitt Burns senior economist David Watt said. “It helped keep our exports competitive. Now the Canadian dollar's gone as a competitive aid. It brings up a lot of implications for the Canadian economy.”
In morning trading, the Canadian dollar reached a fresh 12-year high of $83.04 cents (U.S.). The dollar hasn't topped 83 cents since September, 1992. As the session progressed, the loonie pulled back somewhat to 82.85 cents, though it remained above Wednesday's closing price.
Issues that surfaced last year — when the dollar rose more than 20 per cent against the greenback — now become more crucial as the loonie breaches the OECD's parity level, Mr. Watt said. They include improving productivity as a means of remaining competitive.
“Even last year, when the Canadian dollar was going up and there was talk about the need to get more productive, it wasn't really hitting home as much, because the Canadian dollar had been so far undervalued,” he said.
“Now it's getting to the point where you can't ignore it. You no longer have it as a source that is going to help make you more competitive relative to exports from other countries in the world.”
For example, Mr. Watt said, China is now moving up the “value-added food chain” in terms of exports to the United States, meaning any country that also exports to the U.S. has to try to keep step.
“In Canada, we were sort of insulated from that because of a cheap dollar,” Mr. Watt said. “Now, just as China is becoming more aggressive, we're losing that crutch.”
BMO Nesbitt Burns' current target for the loonie sees it as high as 85 cents (U.S.) by June.
On Wednesday, the loonie managed the biggest increase against the U.S. dollar of 14 major currencies, climbing 1.3 per cent to finish the day at 82.71 cents.
The gains came as the U.S. dollar faltered on world currency markets despite the win by incumbent President George W. Bush as traders worried about the size of the twin U.S. trade and current account deficits and the potential impact for the world's biggest economy.
In early going Thursday, the U.S. dollar was within half a cent of a record low against the euro. It also lost ground against the yen and was at an eight-year low versus the Swiss franc.
The greenback's decline surprised many who had speculated that a Bush win would result in a rally for the flagging U.S. dollar. Some subsequently suggested that mounting worry about the imbalances in the U.S. economy had ultimately taken hold and suggested that the U.S. dollar would have lost ground regardless of who ultimately took office.
“The sell-off of U.S. dollars is at least partly based on fears that the Bush administration sees a weak exchange rate as a solution to the country's ballooning trade deficit,” Royal Bank of Canada economist Carl Gomez said.
The U.S current account deficit — the broadest measure of its dealings with the rest of the world — was at an annual rate of $665-billion in the second quarter, which was 5.7 per cent of U.S. gross domestic product.
http://www.theglobeandmail.com/servlet/story/RTGAM.20041104.wdoll1104/BNStory/Business/