It's great for the Canadian NHL teams! http://www.flyertalk.com/forum/biggrin.gif

People who negotiated their pay in US $ lived very well for the last 6-7 years as the Cdn $ dropped and now that it's rising the expression "what goes around, comes around" springs to my mind.

I am in the import business with most of my purchases denominated in US funds whether the imports are from e.g. New Zealand, China or Thailand. Obviously this helps us in a big way just as the 1.60 hurt us last year. We are involved in the currency business in a big way and I believe that the Canadian currency is benefitting from the greater issue which is the failure of China and Japan to allow their currency to float rather than be tied to the US $. In order to maintain the Chinese currency at its rate to the US$ China must continue to buy US currency. At the end of July according to the Shanghai Post, China held $115 Billion of US currency and must continue to buy, given the imbalance of trade between the two countries and the influx of currency from countries like Canada who pay in US funds. I believe that the US has made a conscious decision to allow its currency to trend downward so that it is increasingly difficult for the Asian countries to maintain their exchange rate. If the Chinese currency is allowed to float, they will realize less RMB when cashing in the US sale prices and prices will trend higher over time. This is probably the hope of the US to help stem the tide of purchases from the far east and the job losses in the US. This is my opinion anyway & is seen from my perspective. The other internal reasons for a low US $ can be presented by others.

I remember in my Strategic Management class about a fundamental flaw with one of the hallmark Canadian economies - pulp and paper.

To summarise the case (analysed by Porter, I believe), while we are a market leader in the global industry (poductivity and profitability)), our strength rests in the weak Canadian dollar. Artificially set our exchange rate to C$0.85 = US$1, and we rank in the bottom quartile in these categories, mostly because when the loonie was weak the companies couldn't afford to import leading technologies.

So, I'm all for a stronger Canadian dollar, but our Industry needs to catch up too.

I say he will lower rates next week. He keeps on counting on the US economic rebound which hasn't quite happened yet. As well, inflation is just going down so there's no reason to raise and the only side affect of doing nothing is that the dollar will continue to rise. He wants a relatively high dollar but recognizes that its ascent was way too quick. Although we have to watch his comments witht he decision which often have more impact then what actually happens.

Therefore he will cut. I'll take you up on a brew at any US airport = cheaper in US funds.

I hope he does cut, it is good for me in my business. If I lose it'll have to be a Canadian beer, I won't be able to afford the US beer, with the lower prime rate and the subsequent lower C$ http://www.flyertalk.com/forum/wink.gif

Canadian manufacturers and those who need to buy imported capital goods to stay competitive can more affordably do so now (and better get going soon). Some economists have long warned that the Canadian economy was getting too hooked on a cheap dollar and deferring improving efficiency.

BTW, I was reading in Forbes.com, FT.com or some such about the U.S. government andhow it shouldn't be so happy with a weak USD. The U.S. government pressured the West German Government to revalue the Mark throughout the '50s and '60s. When Bonn did so in the '70s, all it did was unleash inflation in the U.S., and even worsened the trade deficit, with Germany. Don't know how much that was in combination with O.P.E.C. and Vietnam war costs though (sounds familiar except this time it's China and Iraq?) If the Yuan revalues, it'll make capital equipment even cheaper for Chinese manufacturers and give a helping hand for a huge and rapidly-industrialising economy.

In a word, the U.S. should be careful of what it wishes for lest it gets it.

Productivity is an issue for Canadian firms as they have not been improving at a sufficient rate over the last 20 years as they have been able to use the "weak Canadian dollar" as a strength or a crutch. Granted productivity improvements do not occur over night, however with the rapid rise in the CAD, those firms that can stick it out and improve productivity will be better off and more competitive with the US, and those that can't ... well that is life, the strong survive.

As for the Bank of Canada intervening, well they will not do so directly as Dodge continually states. Interest rates do have an impact on the dollar but the driver for changing the Bank of Canada rate is inflation not the CAD/USD exchange rate. Dodge will not change rates on Oct 15 because he was burned when he reacted to quickly at the beginning of the year. He may lower 25 bp on Dec 2 but not in response to the CAD, by the way this is already partially priced into the markets.

I feel for those that are being stung by the rapid rise but markets can be fickle at times, especially the currency markets. It is a price we pay for having a somewhat "free" market.

Also, if the CAD was called something else other than dollar, this discussion would be slightly different, many people wan the CAD to be par with the USD, because they are both dollars - you never hear this in countries that do not use a dollar named currency.

OK let not complain as there is not much we can do. We had a huge advantage with a weak US$ and we got lazy. Also part of the lumber tariffs and steel problem are related to our low CND $. The US got sick of unfair competition and complained, or went to the courts.
Most economists expect our CND $ to continue to strengthen, so we better look to other countries to export our products. That would be a good idea our trade with the US is to large a percentage and it dangerous.
I expect Dodge to lower our interest rates but we do have to be careful we don’t want to inflate housing prices anymore as already the coming crash will hurt. These low interest rates “trick” stupid buying decisions in our domestic market and that will be harmful in the long run. That’s my 2 cents worth. Lets try to look at the positives of a higher CND $ because it’s inevitable.

I'm not an economist, but I play one on FlyerTalk.

First thing I learned in Economics 100 -- ask 5 economists and you'll get 5 different answers. Six, if one went to Harvard.

As always whenever there is a major change in an economy, there will be winners and there will be losers. But I too am struck about all the whining and complaining I've heard over the years about the low Canadian dollar, only to be replaced with whining and complaing about the high dollar. (Remember when the C$ was worth ~$1.07 USD, about 1976?) (BTW, I'm not suggesting anyone here is whining -- which is quite a change, from usual.)

To me it's just another change, like any number of other changes that are inevitable in life. A change I will adapt to.

Do you expect him to do this Oct 15th? Could cost you a beer?

No not that soon.. http://www.flyertalk.com/forum/smile.gif I sure hope not, it would be stupid, we need to cool the housing markets! If not you will be listening to a lot of complaints later when prices crash!

Well, I'm one of the winners. As an importer from China, Taiwan, Korea and Thailand, I pay in $US for the goods I sell and I've seen the cost of a $US dollar drop from over $1.60 CAD a year ago to a low of just over $1.33 yesterday. It just seems too good to be true.

There ya goes. You either cool the housing market by making money more expensive or you make it more expensive for the companies who need to borrow money to buy capital equipment to make themselves more competitive.

Maybe the government should require higher mortgage downpayments to cool down the market instead.

You go away two weeks and return to find a good debate on productivity, exchange rates and economics. This forum is never dull. http://www.flyertalk.com/forum/smile.gif

I need Euros soon... and the rate will hurt.

Indeed. Some 15% more than 1 1/2 years ago, I noticed.