If only it was possible to pick an economics "expert" that was consistently correct. :(

Within a couple of days earlier this month I heard one well-known BC economist stridently insist that the dollar would be at par with the US counterpart in about 1 year. Then one of the BIG BANK's economists stated that the dollar is already too high based upon the overall economics and will settle back to the 85 cent range.

Of course, if these guys were really confident they're personal currency trading activity should show it. I doubt they've bet the farm on their own predictions.

For the last three years, I have closely followed the predicitions of Avery Shenfield, Warren Lovely, Ben Tal and Jeff Rubin of CIBC World Markets. They have been as close as any in their oil, rate, gold, currency predictions.

I find Sherry Cooper of BMO to be more hot air clamouring for media time than substance.

RBC and TD's people are predicting an implosion of the world economy, well not quite, but they are very bearish. May prove to be correct though.

IMarmchairO, the fundamentals are for Canada to continue to have a very strong currency against all others, not just the greenback. Look at our $ now now compared to the mighty pound (no symbol on my laptop).

It used to be impossible to spend more on dinner in top restaurants in Toronto than in some curry house dive in London but times have indeed changed...for the moment.

The supposed benefit for consumers of the rising CAD is that it could buy more imported goods at a lower cost as most imports are denominated in USD. I haven't seen any drop in prices of groceries imported from the USA nor have I seen that in electronic goods or vehicles manufactured in the USA. Have you seen any evidence of this supposed benefit for consumers? My guess is that the 25 cent rise over the last 2 years have been eaten by the middleman. They have pocketed the money and did not pass it onto you and I.

If $60/70oil is the new reality longer term than it will be difficult to knock the canuckbuck off stride. Also if commodity prices for base metals stsy high than it is even less likely the buck will go down and it could go above par.

That being said, I believe par value for the CDN $ is around 82/85 cents US due to our social infrastructure and our big underpopulated Country.

Oil price will come down when China gets itself in a recession. Whether that will happen in a year or five or ten is not a guess I am prepared to make.

Commodities will fall when the US fall into a recession. Not if, when.

Some time back there was a study that claimed for Canada's manufacturing costs to reach the US level, the CAD would need to reach parity with the USD. Canadian health care actually *helps.* Look at what large US organizations have to spend on health insurance, not just for current employees, but also retirees.

This said, I would argue that trying to define a long term equilibrium rate makes no sense: it's a moving target. As long as both US deficits lead both debts accumulate, there is a downward trend for the USD. And vice-versa for the CAD.

Plus, we tend to forget that a good deal of the economy is not really market-driven (such as, most prominently, the automobile sector). Which makes it largely exchange-rate neutral. Look at how prices compared between Canada and the US when the CAD was 60 cents, and what it's now. You'll see that prices in Canada are roughly the same in CAD now and then. That is, they did not drop, so cars now tend to be more expensive on this side of the border. While the opposite was true five years ago.

Most vegetable and fruit prices are quite stable and even lower than recent years. At least when I go shopping this is the case. Lettuce is back down to the 99-cent to $1.49 level. Tomatoes anywhere from $1.49 to $2.99 a pound depending upon source. Even cleaned and packaged salads are down in price. Orange juice (not from Concentrate) has also been selling in the $2.49 to $3.49 price range for 1.89 litre containers, quite stable. So prices at the wholesale level have dropped but this savings as a result of the stronger dollars (on imports from the US and Mexico) have been offset by higher energy costs incurred getting the produce up here. Had the dollar not strengthened, I am sure we'd have seen significant store price rises.

As for the prices of manufactured goods like computers and household electronics, even if they are assembled in the US or known as US brands, they are manufactured overseas and there has been less pressure on those currencies. There is also an inventory lag of several months to contend with, so adjustment of prices don't occur immediately.

All the better for a cheaper stay in Japan! :D

Sanosuke!

Then and now
 

I can't help but chuckle as I read the original couple of posts from Oct 2003. Who would have thought we would now be talking about a Canadian dollar at >90 cents or discussions about the potential for par? Now the TSE is at sky high levels, the oil companies are bathing in money, the banks are making lots, etc.

While I can sympathize with those who get paid in US dollars, what goes around comes around. You made a killing at 0.62 cents. Good times are typically followed by bad times.

The rising cost CDN dollar cost me that job 2 years ago as my employer said prices were not in line with my US counterparts (long story). I made sure to work for a company that now pays me in CDN dollars ;)

McDonald's Canada Inc.? :p

The thong warehouse......don't you get it? ;)

Except the CAD isn't doing much better over the MTL!!! Argh.

Oh well.

But the CAD is doing well against the Thai Baht, Malaysian Ringgit, and the Sing Dollar which made my trip very nice!!! At current rates, the UK might come within a shadow of being affordable.....but why go to London when everything is so much better in Singapore?? :D :D

I have a perfect example of this.

My distributor currently uses a $1.22 exchange rate to set their prices. If they would even us a $1.15 exchange (to give themselves a buffer) I know that the retail cost of my product would drop from $59.99 to $54.99 which is almost a 10% savings to the customer. The competitive nature of my industry would ensure that price drop which is money back in consumers pockets.

I realize that fuel is a consideration these days but if my distributor could use the 3% exchange difference to soak that up for now. If the dollar drops enough then they could put a fuel surcharge on all deliveries and my retail price would likely not rise more than even $1.00 at retail (if at all)