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09-20-2007, 08:09 PM #1
Loonie Briefly Reaches Parity With American Dollar
Would ya look at that! First time in my life-time.
Thursday September 20, 2007
Remember that old expression from former U.S. President Harry Truman: "the buck stops here?" If the Commander-in-Chief were around today, he wouldn't be able to say that about the Canadian dollar. The surging Canuck buck briefly went above parity with its American counterpart on Thursday, after months of steady growth.
The loonie officially hit $1.0004, at 10:58am, making it virtually even with the Yankee dollar. It's since sunk back to the upper 99-cent level, but just about every analyst agrees it won't stay there long. Our currency hasn't been this high since November 1976, when disco was just starting to become king. Thankfully, it's only the buck that's made the resurgence.
But while the rise of this dough is good news for those looking to do some cross border shopping, it's potentially disastrous for people in the manufacturing and tourism sector. There are already clear signs that the number of American visitors to this country are down, as the lure of making their money go farther disappears.
But after a 30 year wait, most economists aren't looking at the long term - just the excitement of the chase. "What the story is really saying is that Canadians are getting richer relative to the U.S. and hence Canadian assets are getting richer to the U.S.," explains CIBC economist Jeff Rubin. "It really represents a very dramatic reversal of fortune from what would have happened 10 years ago when our resource economy made us look rust belt compared to the technological dynamo of the U.S. economy."
Has the lure of the lucre brought back the spectre of cross border shopping? It's already happening. Take a trip to one of those bargain outlets in Buffalo or Niagara Falls and the entire parking lot is filled with Ontario license plates. Sean Neville is one of those bargain hunters. "The deals are decent," he agrees. "I think the combination of good deals at the outlet mall and a strong Canadian dollar makes you come to Buffalo."
"We notice more Ontario automobiles here, we never saw that for some years, you know?" observes Gordon Kaiser. "But now with the dollar in a better position, it's enticing people to come over."
It's been coming for some time, but the final rocket boost was triggered earlier this week when the U.S. Federal Reserve lowered interest rates, launching our dollar into orbit. "Obviously for traders it's a key psychological level. It will be interesting to see how long it takes for to us get through it and stay through it," outlines Richard Wylie of Assante Wealth Management. "Obviously, since we have touched it today, trade has occurred, so we have actually seen it happen."
Which leads to the inevitable question: can the dollar actually exceed its American cousin, like it once did several decades ago? The CIBC's Paul Ferley doesn't think so, predicting the weakness in the U.S. economy won't last long. "You'll see conditions improve a bit and eventually you will start seeing rates move up in the U.S. In that kind of environment I think some of this pressure that we're seeing will get reversed and I think there's a chance in '08 that you start getting the Canadian dollar moving back down below parity."
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09-20-2007, 08:52 PM #2
09-20-2007, 11:43 PM #3
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We used to go to Canada every year when I was a kid. My Grandmother was born/raised in Victoria, BC and we went into Vancouver alot. The exchange rate was always pretty favorable. When I hit 19 it was trips to BC in either Vancouver or White Rock and a good exchange rate meant cheaper drinks too. Guess that's not the case anymore. Kids should be studying anyhow, not going up there to drink.
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