Dollar heading above 96 cents US: RBC

[simply Dan]

http://www.cbc.ca/money/story/2007/05/30/dollarforecast.html

Already bouncing along at levels not seen in 30 years, the Canadian dollar is expected to hit 96.15 cents US by the end of September, according to an investment bank report.

RBC Capital Markets issued that forecast on Wednesday, one day after the Bank of Canada dropped strong signals that interest rates may have to go up to contain inflation pressures. The bank left its key interest rate steady at 4.25 per cent.

RBC believes the central bank will boost rates three times this year for a total increase of three-quarters of a percentage point. The first increase is expected in July.

On Wednesday, the loonie slipped slightly to close at 93.12 cents US, down 0.03 cents US.

Some economists expect the Canadian dollar will push all the way to even strength with the U.S. dollar.

Clement Gignac, the chief fixed income strategist at National Bank of Canada, predicts that the loonie would likely reach parity with the U.S. dollar by 2009.

Already bouncing along at levels not seen in 30 years, the Canadian dollar is expected to hit 96.15 cents US by the end of September, according to an investment bank report.

RBC Capital Markets issued that forecast on Wednesday, one day after the Bank of Canada dropped strong signals that interest rates may have to go up to contain inflation pressures. The bank left its key interest rate steady at 4.25 per cent.

RBC believes the central bank will boost rates three times this year for a total increase of three-quarters of a percentage point. The first increase is expected in July.

On Wednesday, the loonie slipped slightly to close at 93.12 cents US, down 0.03 cents US.

Some economists expect the Canadian dollar will push all the way to even strength with the U.S. dollar.

Clement Gignac, the chief fixed income strategist at National Bank of Canada, predicts that the loonie would likely reach parity with the U.S. dollar by 2009.

"We reiterate that the Canadian dollar is likely to reach parity with the U.S. dollar before the end of the decade," he wrote on May 11.

Gignac sees the loonie averaging 95 cents US in 2008 and $1 US in 2009.

 

[afransen]

My dad used to own a garden centre in the Port Colbourne back when the CDN was worth more than the USD. Apparently the American cottagers (from Sherkston) found it quite galling when they tried to pay in USD for goods and asked to cough up extra.

Maybe they'll get to enjoy that sensation again (though since Niagara is a huge floraculture exporter, the high dollar has been largely detrimental).

 

[Hydrogen]

Certainly will make my coming trips to the U.S. cheaper.

 

[Observer Walt]

A higher Cdn dollar will cause problems for our exports and for our (already struggling) tourist industry. Not good news!

 

[Hydrogen]

Sad that all we have to rely on is a cheap dollar.

 

[unimaginative2]

Sure, it was quite a boost when it was back at 65 or so cents, but we're already way above around 85 where most people consider the natural exchange rate. Moreover, it's the speed of the rise that has been devastating to exporters. More interest rate hikes at this point are crazy.

 

[Prometheus The Supremo]

if the pot boils too fast, the frog will jump out.

P.S, how we doing VS. the euro?

 

[ganjavih]

The weakening US dollar has certainly made my US trips more enjoyable.

ganjavih - livin' it up in lower Manhattan

 

[interchange42]

P.S, how we doing VS. the euro?

A couple of weeks ago, we were at about 1.5 $Cdn to 1 €. Now it's $1.44 approximately, so we're rising against it too...

42

 

[Prometheus The Supremo]

that's insane!

i wonder how long it will stay high and if it will ever go back down to the high 60's.

 

[Long Island Mike]

Everyone: The US Dollar's value decline will no doubt hurt Canadian visits by US tourists-not to mention the new border security rules and passport requirements. Does anyone remember when in the 70s that the Canadian Dollar was valued higher than the USD? I feel the dollars could be evenly valued even sooner than we all think...Who would have thought when the US Dollar was upwards of $1.60 CDN that this would happen-what exactly was that high value?-Jog my memory-LI MIKE

 

[Urban Shocker]

I remember it quite well - as poor OCA(D) students in the early '70's our field trips to Manhattan were quite affordable.

Ah, the Taft Hotel, the drag queen bars on Times Square, the ungentrified artist district ...

 

[simply Dan]

http://www.cbc.ca/money/story/2007/06/01/dollarparity.html

Dollar parity by end of 2007: economist

Solid Canadian economic growth and a rise in interest rates will push the loonie to parity with the U.S. dollar by the end of the year, a CIBC World Markets economist said Friday.

Jeff Rubin said the loonie will remain on par with the U.S. greenback through at least the first three months of 2008.

"Between red-hot commodity and energy markets and huge capital inflows associated with an avalanche of [merger and acquisition] deals, the Canadian currency has plenty of octane left to take a concerted run toward parity against the greenback and hold it into at least the first quarter of 2008," said Rubin, who is chief strategist and chief economist at CIBC World Markets.

The loonie was trading Friday morning at 93.76 cents US, up 0.27 of a cent from Thursday's close. The loonie has not been in its current range since late July 1977.

Earlier this week, the Bank of Canada signalled that it was prepared to raise interest rates to keep a lid on inflation pressure. In addition, Thursday's report that the Canadian economy grew at an annual rate of 3.7 per cent in the first quarter of the year only added to the sentiment that rates will be going up, possibly as soon as July.

The economy has also been adding jobs, pushing the unemployment rate to 6.1 per cent in April. The May jobless report will be released on June 8.

Rubin said it remains to be seen how far the Bank of Canada may push interest rates.

"With the [U.S. Federal Reserve] still likely to cut rates in Q4, we now expect the Canadian dollar to climb to parity with the U.S. dollar by year-end and remain in that range over the first half of 2008," Rubin said.

 

[billy corgan]

Time to open up a US currency account.

 

[TrickyRicky]

Not knowing all that much about macro-economics could someone explain why the large increase in the dollars international value doesn't have a strong de-flationary impact? It seems to me that increasing interest rates would provide a multiplier to the natural de-flationary impact of moving to a stronger dollar economy. So why would economists be so eager for rate increases if it could unpredictably overshoot? Maybe they want to purposely take steam out of the construction and real estate markets?