'Incredible' loonie tops $1.09 US - Economists say run-up will end ... but when?

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Every Breaking Wave

Every Breaking Wave

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The Canadian loonie broke through another psychological barrier Tuesday, rising above $1.09 US in after-hours trading and raising alarms that the rapid acceleration is both unsustainable and damaging to the economy.

With crude oil closing in on the increasingly inevitable $100 US a barrel era, and other commodities also showing stubborn strength, the Canadian currency had another day for the record books, adding on to Monday's previous all-time high close to finish regular trading Tuesday in Toronto at 108.52 cents US, up 1.34 cents.

"This is nothing short of incredible," said Douglas Porter, deputy chief economist with BMO Capital Markets. "I'd like to say we're nearing the end of the run, but I can't say that confidently."
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Full story here


If the CAD keeps rising and the USD keeps falling at these rates, we could both be heading into a recession; and if the US economy goes into recession, you just know the majority of the globe is likely to do so as well.
 
The Canadian dollar is called a "loonie"? That's priceless. Priceless.
 
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Per XE.com, the rate right now is 1.099. The unthinkable - 1.10 - is looking more and more thinkable.

Also, love how XE has gone to add a special notice on their site explaining that the current display means CAD is in fact worth *MORE* Than USD.
 
Eh, today one US dollar bought 92 Canadian cents.

Does this mean anything in the long run?
 
Economics are such crap. Who really cares if the US Dollar isn't worth as much as the Canadian dollar? If I go to Canada with 100 US dollars, I'm going to get roughly 100 Canadian dollars in exchange, I might be out a couple dollars, but I don't mind. Yeah, I know there's more to economics than that, I just don't really care. I'm not broke and I have enough money to take care of my needs, I'm pretty happy with the economy.
 
It's the sudden rate that is so damaging. Nobody will be laughing when inflation increases to compensate for the loss in value; and there will be even fewer smiles if the economy collapses, leading to a recession. Practically the entire globe is built around the USD; if there is a recession, it will be a global recession. Dirty 30's anyone?

EDIT: Apparently the loonie surpassed $1.10 USD last night in overnight trading, but plummeted to just over $1.07 today.
 
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Actually, that may change in the coming months and years if the situation with the USD continues. Oil cartels don't like having their prices fall just because the USD is weak.
 
It makes sense when you think about it; the Euro is the standard currency for most of Europe, and the number of countries that use it expands every year.
 
OPEC prices their oil prices in terms of dollars. That isn't going to change anytime soon no matter how far the dollar falls. Why? Because they invested all those excess petro-dollars in U.S. treasury notes and bonds. If they try to sell those notes today, they will suffer major losses because they bought those notes at a much higher dollar value. Whether they like it or not, OPEC is stuck with dollar pricing because they've got so much invested in the dollar. All they can do is hope the dollar gains value as it will eventually.

The same is true for China and Japan who have had trade surpluses with the U.S. for many years. They invested their excess dollars in U.S. Treasury notes and bonds,.
 
I do wonder if the people up there ever get the nagging thought at the back of their mind that China's foreign exchange reserves are about 10% the size of the US GDP?

Anyway, OPEC isn't so patient as to wait around for the dollar to appreciate. They will just increase the prices. And if the dollar appreciates, I wouldn't be surprised if they don't hurry to cut prices either.
 
I hate to stray off-topic, but I've noticed that most of us egotistical self-centered Canadians are laughing and calling Americans losers even more than usual because of this, when merely years ago our dollar was only worth about 0.60 USD.

Well, that's Canada for ya...

EDIT: Spelling error, original post can be seen quoted below.
 
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XD375 said:
I hate to stray off-topic, bu I've noticed that most of us egotistical self-centered Canadians are laughing and calling Americans losers even more than usual because of this, when merely years ago our dollar was only worth about 0.60 USD.

Well, that's Canada for ya...
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Wasn't it below 0.9 at the start of the year? Incredible if so.

Back on topic: The loonie dropped just below $1.06 in after-hours trading today. Full story from CBC.ca
 
The Canadian dollar was neck-and-neck with the American greenback on Tuesday, overtaking it in the afternoon after briefly falling below parity because of slumping oil prices and hints of coming interest rate cuts.


The loonie traded as low as 99.97 cents US near 3 p.m. EST, then bounced and traded a few minutes later at 100.27 cents.


It ended the volatile day off 0.39 of a cent to 100.50 cents US, continuing a downward trend that has seen it steadily decline since topping out just above 110 cents US on Nov. 7.
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Source: http://ca.news.yahoo.com/s/capress/071127/business/loonie
 
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