canadian dollar - Articles - Zimbio

Global currency imbalances

Sat, 18 Nov 2007 21:20:13 GMT

posted by bhaque

The Bank of Canada is expected to adjust its current monetary policy “to reflect the growing risk of a global economic slowdown” (Governor, David Dodge). Looks like we might not see an interest rate cut after all.

“It’s quite clear that global financial turbulence that we were experiencing then is now going to be more prolonged and the volatility is likely to be higher for longer than we anticipated.” –David Dodge

Mr. Dodge further added that the central bank would need to consider the growing economic risks when setting its policies (including interest rates) for the coming months.

Both Dodge and Finance Minister Jim Flaherty are urging China to increase its currency’s value, and to help expand its domestic demand and consumption. This is, by the way, supposed to help the global market in adjusting to the declining U.S. Dollar, and weaker economic growth in the U.S.A.

The current, and growing, global currency imbalances are a result of America’s huge trade deficits with its trading partners, and higher commodity prices. However, although China holds a massive trade surplus with the United States, the value of its currency (the Yuan), is set by the government; it does not change in value along with the economy’s strength. Today, the Yuan is considered to be substantially undervalued.

Exporters in several countries, including Canada, have been hurt by their appreciating currency. The Canadian government estimated that it shouldered about a third of the burden created by the depreciating U.S. dollar. According to these countries, the global currencies are not at an equilibrium where they facilitate trade.

Although I believe a revaluation of China’s currency is important to unwind global imbalances, I don’t think it is in our best interest to continue complaining about a lack of fairness or competitive disadvantage. Yes, our currency being higher than the USD does put some more pressure on us; but how we deal with this pressure is key.

The United States export sector has historically been at a huge pricing disadvantage; yet, these companies have outperformed many in the international arena. The reason being, their business operations had become more efficient and innovative - something our Canadian businesses need to focus on.

The key to economic success is not advocating for an undervalued currency; The key is to develop efficient and innovative business practices.

Copyright © 2007
Canadian Business | http://www.canadian-business.info | (digitalfingerprint: 33c5387ae785149862992a0b75bbbd4e (72.32.7.27) )

Why the strong Canadian Dollar is not helping lower prices

Fri, 4 Aug 2007 07:54:49 GMT

posted by bhaque

I am guessing you are looking forward for an answer in this post. I’m sorry, but you won’t find one. Unfortunately, I myself am looking for an answer… I am frustrated at the fact that we are currently paying too much for imported goods. The recent surge of the Canadian dollar should reflect on the prices we pay for imported products. The savings from a high dollar versus other currencies should ultimately be passed on to the consumers; in other words, prices need to be adjusted lower.

Top 3 reasons to why the savings should be forwarded to the consumers:

I enjoy buying things when they are cheap
Canadians might start shopping in the United States, where savings can reach 40 per cent.
I really enjoy buying things when they are cheap

All jokes aside, this is an important issue for the Canadian economy, and should be dealt with accordingly. These currency imbalances could seriously hurt the economy, among the build-up of reserves in China and the credit crunch stemming from the sub-prime mortgage meltdown in the U.S.

Please respond to our poll this week: Do you think the Canadian Dollar will soon hit parity with the U.S. dollar?

Copyright © 2007
Canadian Business | http://www.canadian-business.info | (digitalfingerprint: 33c5387ae785149862992a0b75bbbd4e (72.32.7.27) )

Canadian-American Dollar Parity

Mon, 21 Aug 2007 23:57:42 GMT

posted by bhaque

The Canadian dollar fell today in the wake of an inflation report that economists said is more likely to keep the Bank of Canada on the sidelines next month. The central bank raised interest rates to 4.5 percent on July 10, and suggested that further increases were a possibility - due to inflationary pressures. Although the Bank of Canada will probably hold off an additional rate hike because of the recent credit worries, the U.S. Federal Reserve is no longer expected to stay put on Sept. 18. Economists predict the U.S. Feds to cut rates to mitigate the increased downside risks to economic growth. Some economists see the lack of Bank of Canada tightening, and a weaker starting point to take away the Canadian dollar’s shot at parity.

Whatever the case may be, there are many other issues to consider. Many foreign countries are looking to reduce their holdings of US dollars for a variety of reasons. Countries like Iran, and even European nations and Japan are looking to move commodity trading to other currencies, such as the Euro or Yen. Many other countries hold so much US dollar debt that they do not want more US dollar exposure.

While on the other hand, the Canadian dollar may be volatile, but its position as being one of the most appreciating currencies in the world, not just against the USD, is backed by strong fundamentals including a growing demand for our commodities, a strong economy and well managed finances.

We are well past those days where we could simply put Canada and America side-by-side to forecast their respective currencies against one another.

Let’s take a look at some of the effects of a strong Canadian dollar:

Canadian exporters lose ground because their products become more expensive for U.S. buyers
- Since 2002, Statistics Canada says 189,000 manufacturing jobs have disappeared in Canada. The agency places the blame squarely on the soaring loonie.
Canadian exporters will need to improve efficiency and innovation in order to sell (a good thing), rather than relying on a cheap loonie
Canadian companies can invest more in U.S.-made tools to help improve efficiency and competitiveness
As the Canadian dollar rises, the cost of repaying U.S. dollar debt falls
Canadian visitors to the U.S. will find their money buying a lot more south of the border
Conversely, U.S. visitors to Canada will find their money buying less here

Highest Canadian Dollar since 1977

Sat, 16 Sep 2007 16:28:29 GMT

posted by bhaque

Canadian-American dollar parity - more closer than we think? Well, the gap certainly seems to get smaller and smaller. Last week the Canadian dollar traded in Toronto at a new 30-year-high, at 97.04 cents USD. The last time the Canadian dollar traded so high against the US Dollar was mid-February 1977 - more than 30 years ago.

Part of the loonie’s growing strength recently is a result of strong demand for oil and metals amid strong global demand for those commodities. Another very important, and underrated factor, is the weakness of the U.S. dollar. The U.S. dollar has been very weak due the recent slowdown in the housing sector that has been spreading to other parts of the U.S. economy and worldwide.

For more information, see the effects of a high Canadian dollar.

Welcome to our wikizine called "canadian dollar"

Thu, 20 Jul 2007 04:57:57 GMT

posted by bhaque
Wikizines are interactive magazines that anyone can create or edit - and this one is called "canadian dollar". Here you can find fresh voices and respond in real time. Some members write articles about recent news and trends related to the wikizine's topic, others recount relevant personal stories or share their favorite pictures and video clips. Got an interesting idea or story to share with other members of this wikizine? Well, then put on your journalist's cap and add your own article!

canadian dollar - Articles - Zimbio

Global currency imbalances

Related Posts

Why the strong Canadian Dollar is not helping lower prices

Related Posts

Canadian-American Dollar Parity

Related Posts

Highest Canadian Dollar since 1977

Related Posts

Welcome to our wikizine called "canadian dollar"