Loonie Plunges below 2005 levels [Archive] - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

Tron_fdc

10-22-2008, 11:33 AM

Mccree

10-22-2008, 11:36 AM

Doesn't gold normally go up when the Markets go down? If so why is Gold down 22.00 today? I thnk the markets are just crazy now and NOTHING makes sense!!

Nancy

10-22-2008, 11:36 AM

Oil is on a big decline today. The interest rate cut doesn't help either.

Patrick

10-22-2008, 11:36 AM

Ronald Pagan

10-22-2008, 11:39 AM

When the Bank of Canada cut the interest rate the money supply increased because of more money being lent out due to cheap lending rates. A bigger supply of money means that it is less valuable because it's easier to get your hands on.

To explain the devaluations over the past 2 months or so, the energy sector has been hard hit and is one of Canada's main exports and sectors for foreign direct investment. When we export a good with less value on the global market, international buyers have to buy less Canadian dollars to buy our goods which drives down the demand for Canadian money. Equivalently, lower oil prices lower FDI inflows for projects in the oil sands. Less FDI means that less Canadian money needs to be exchanged for some other money lowering demand.

So there you go, in a nutshell why the Canadian dollar has devalued.

As per why the American dollar is strengthening, that's a more interesting question. And I don't have the answer off the top of my head.

tvp2003

10-22-2008, 11:40 AM

I won't even try to figure out this nonsense... all I know is that my trip to the States next week is becoming more expensive by the day :(

peter12

10-22-2008, 11:41 AM

Could this blip in the USD be the result of international hedging in the case of a mass US economic depression?

Bobblehead

10-22-2008, 11:48 AM

Okay, so WTF is going on? The US dollar is STRENGTHENING against pretty much every currency on the planet, when their government has brought them (arguably) closer to a depression than at any point since the 30's.

Can someone explain that to me? Shouldn't the US dollar WEAKEN right now?

US investors are hurting and selling their international holdings in order to shore up things at home.

Simply put, US companies can't borrow the money they need anymore, but they need to get that money from somewhere. So they are selling their holdings, both nationally and internationally. When they sell their international holdings, they then buy US dollars. That increases demand for the US dollar, increasing its value.

peter12

10-22-2008, 11:50 AM

US investors are hurting and selling their international holdings in order to shore up things at home.

Simply put, US companies can't borrow the money they need anymore, but they need to get that money from somewhere. So they are selling their holdings, both nationally and internationally. When they sell their international holdings, they then buy US dollars. That increases demand for the US dollar, increasing its value.

So... is this temporary? Will it lead to a crash in the USD before November 20?

Ronald Pagan

10-22-2008, 11:51 AM

So... is this temporary? Will it lead to a crash in the USD before November 20?
If I could answer that I wouldn't be some schmoe on the interweb.

Bobblehead

10-22-2008, 12:23 PM

So... is this temporary? Will it lead to a crash in the USD before November 20?

Temporary? Well, that all depends upon the timespan you are looking at. If I had to guess, I would say no chance there is a drastic shift back the other way.

Just think of all the things happening even from the Canuck point of view. US investments in Canada made a few weeks ago have lost a lot of money. Will that cause investors to be scared similar to a bear stock market, or are Canadian labour and materials now a bargain to Americans? Now add these questions to almost every other country.

The old belief was that when a country adopted a "Beggar-thy-neighbour" policy (the act of devaluing your own currency to make your goods appear cheaper was teh classic example I was taught(wiki link (http://en.wikipedia.org/wiki/Beggar_thy_neighbour))) it would take 2 years to realize the full impact of these types of policies.

However, with the speed of international banking and the amount of information that is almost immediately available, I'm sure adjustments occur much quicker.

I'd imagine there are going to be more ripples or echos from this credit shock, and economists are good at figuring out why stuff happened, but what is going to happen all depends in a large part upon the human responses, so until people always react predictably, there will always be uncertainty.

GGG

10-22-2008, 12:28 PM

Really our dollar should be priced in Barrels of Oil rather than US dollars. As the price of Oil drops the value of our exports go down.

As far as Alberta Industry goes the crashing dollar is offsetting the dropping price of oil in US dollars.

malcolmk14

10-22-2008, 12:40 PM

Good for Alberta oil when the dollar drops. They sell their oil in USD and pay their employees in CDN.

stang

10-22-2008, 12:44 PM

http://img134.imageshack.us/img134/6968/fuuuhw9.png

pepper24

10-22-2008, 12:45 PM

Good for Alberta oil when the dollar drops. They sell their oil in USD and pay their employees in CDN.

Opposite effect for the Flames and all Canadian NHL teams.

Though technically all the Flames owners are tied in with oil so they gain with their oil companies and lose out with the Flames.

malcolmk14

10-22-2008, 12:47 PM

I'm curious. Anyone have any math regarding how much a 10 cent change in the dollar affects the Flames in terms of net profit?

ken0042

10-22-2008, 12:52 PM

Yikes, I have a trip planned to Seattle Nov. 21-25. Hope it doesn't go down much more.

Yeah, I have a trip planned for the same week. When I saw it costing over $1.10 to buy I decided to wait.

Today I am buying a bunch of US cash. At least we are partially insulated; the sporting event tickets were bought months ago with near par dollars.

peter12

10-22-2008, 12:53 PM

Yeah, I have a trip planned for the same week. When I saw it costing over $1.10 to buy I decided to wait.

Today I am buying a bunch of US cash. At least we are partially insulated; the sporting event tickets were bought months ago with near par dollars.

Yeah, I paid accomodation and tickets for the concerts I am attending back when the dollars were near par. I think I might go ahead and get a bunch of USD tonight, in case things get worse.

GGG

10-22-2008, 01:00 PM

I'm curious. Anyone have any math regarding how much a 10 cent change in the dollar affects the Flames in terms of net profit?

It really depends on how much they hedge. Since a significant amount of the flames money comes in at the start of the season in Season ticket sales they could have converted that money at almost par to cover Salaries.

Their payroll is 56million so the difference between 90 cent dollar and an 80 cent dollar is about 8 million

Flames89

10-22-2008, 01:06 PM

US$ is going up, also because the rest of the world's prospects look even worse. All currencies are dropping against the US$ because it is seen as the most resiliant (it really helps when all commodities are based in your dollar). Once all the global players realized they were in NO way decoupled from the US - they let out a collective "oh $h!t", and have tanked as well.

Our recent quick drop, as mentioned above, is b/c of the recent Canadian Fed lowering of interest rates - raising the worry amongst market players that the spread between our rates and the US will grow - which is valid if you prescribe by the generality that Canada lags the US.

US got us in this mess, and they can get us out - on the backs of the emerging countries like China.

... and as for Gold. As US$ rises, gold will fall - as the US$ provides a better investment option. As commodities rise, gold should also rise as a hedge against inflation. This is why we saw a blip upwards in gold when oil also blipped. But regardless, yes, everything is f-ed.

MoneyGuy

10-23-2008, 01:42 PM

I have done some economics study (some as part of the CFP program) and this is my take on the loonie's drop lately. Despite the woes in the States, investors are shunning energy and commodities as being risky (which affects the loonie), and taking refuge in the one currency that is seen as a safe haven - the greenback (sending it's price up). There may be more to it than that, but I think that is a big part of the answer. There may be an economist here who can provide a more full answer.

Gee, am I ever glad I opened a U.S.-dollar high-interest savings account and deposited about $15k when the loonie was trading above par with the greenback. :)

Ronald Pagan

10-24-2008, 09:04 AM

When in doubt ask The Economist

The dollar’s recovery is a little harder to fathom. After all, the origins of the credit crunch lie in America’s housing bust, which has resulted in huge losses for banks worldwide on securities backed by souring American mortgages. The crisis intensified because of the failure of an American bank, Lehman Brothers. And America itself relies on the kindness of strangers to keep its show on the road: it ran a current-account deficit of 5% of GDP in the second quarter. These reasons not to like the dollar are trumped by its enduring appeal as the world’s reserve currency. Jittery investors want to be able to turn their assets to cash quickly and America’s bond markets are the most liquid in the world. It is likely that the dollar has also benefited from a repatriation of funds by investors at home. Before its recent rally, the dollar (like the yen) looked cheap on conventional benchmarks, such as purchasing-power parity: at least some bad news had already been priced into America’s currency. The sell-off in sterling and the sharp drop on European and Asian stockmarkets suggests that the troubles of rest of the world are only just beginning.

http://www.economist.com/finance/displayStory.cfm?story_id=12493792&source=features_box_main

Bobblehead

10-24-2008, 09:09 AM

I just read this article last night:
http://www.economist.com/displaystory.cfm?story_id=12415730

It gives a step by step of how this all developed. I wouldn't say anyone can understand it, but it it probably as simplified as it is going to get without losing critical details or becoming 5 times longer.

llama64

10-24-2008, 09:21 AM

I find this interesting. Canada's dollar drop is a simple result of the downturn in the commodities market (Oil primarilly).

The downturn is being caused by everyone around the world canceling or postponing their large projects due to the hesitation in the US market (thanks to the credit debacle). Basically the demand for Canadian resources had dropped, taking our dollar with it.

Fair enough.

Thing is, once the US election is decided(either way really), all these companies/organizations that have stopped development for now will have a better sense of where things are going and will return to their developments. The demand for resources will return and the Canadian dollar will jump back to where it should be.

By this time next year, we will be doing just fine. Unless I'm somehow missing the basics of the Canadian economy somewhere....

This just goes to show everyone just how stupid it is to base a first world nations economy on resources. Canada needs to start investing it's resource wealth into itself rather then continuing to fuel the development of other nations.

10-24-2008, 11:52 AM

US$ is going up, also because the rest of the world's prospects look even worse.

Not all currencies. The JPY has absolutely crushed the USD. It's been amazing to watch, really.

As for why? Who knows. I just read the chart and figure out where things are going from there. It works well enough.

Bobblehead

10-24-2008, 12:14 PM

Not all currencies. The JPY has absolutely crushed the USD. It's been amazing to watch, really.

As for why? Who knows. I just read the chart and figure out where things are going from there. It works well enough.

During the Japanese banking crisis they cut their central rate down to 0. Even since, it has not risen up to match other countries.

So traders would borrow for low rates from Japan, and invest them in other countries with higher rates.

Now the people that did this see the countries where they invested dropping the rates like Japan did, and they start pulling out of those investments. So they sell those instruments and, in order to pay off the Japanese loans they buy up the Yen. This increases the supply of the foreign currencies and increases the demand for the Yen. The AUS $ is getting the crap kicked out of it right now.

And of course, as the Yen becomes more valuable, people who borrowed in Yen then converted to foreign currencies are now seeing those foreign investments dropping in value (relative to the Yen) and they are getting scared and "feeding the bear".

Generally, the way to offset this would be to raise interest rates to offset the decline in the value of the currency. But banks can't do that because the last thing they want is to shrink the credit market.

ken0042

10-29-2008, 10:22 AM

Looks like the Canadian dollar is making some serious gains today.
http://www.tdcommercialbanking.com/tradefinance/rates.jsp

troutman

10-29-2008, 10:28 AM

http://ichart.finance.yahoo.com/b?s=CADUSD=X

troutman

10-29-2008, 10:28 AM

http://ichart.finance.yahoo.com/1y?cadusd=x

10-29-2008, 10:39 AM

Looks like the Canadian dollar is making some serious gains today.
http://www.tdcommercialbanking.com/tradefinance/rates.jsp
Well of course it is. I got back from Vegas last night. :mad:

MoneyGuy

10-29-2008, 10:50 AM

Don't bet on currencies. You won't win.

Nancy

10-29-2008, 10:51 AM

Oil spot is up almost 10% today. Amazing just how much the C$ depends on oil.

Flames89

10-29-2008, 11:05 AM

http://img510.imageshack.us/img510/4043/cadwtizc1.jpg

White line is Canadian Dollar, Orange is Oil.

2004 - 2008.http://img510.imageshack.us/my.php?image=cadwtizc1.jpg

Nehkara

11-01-2008, 09:26 AM

Wow. Canadian Dollar gained about 6 cents to end the week... I hope that it holds this gain and stabilizes in and around 85 cents.

the crispy badger

11-01-2008, 09:47 AM

going on a trip to NYC at the end of the year..pleaseeeeeeee stabilize!

Bobblehead

11-04-2008, 12:13 PM

And .8696 today.
http://www.theglobeandmail.com/servlet/story/RTGAM.20081104.wloon1104/BNStory/Business

The volatile Canadian dollar, lifted by rising commodity prices, surged more than two cents Tuesday to 86.96 cents (U.S.) – up more than 9 cents from a week ago.

Cactus Jack

11-04-2008, 02:04 PM

This is more like it! 85 cents is pretty good. I was in the US and got bent over the couch on the extra rate last month. This a healthy level for both the general population and exporters. I can live with 85cents.

This leads to my question: when travelling, what's the best way to buy foreign currency? I'm going to Brazil for the holidays and don't want to buy US$ and then Brazilian reais because you get screwed on the double conversion. Is withdrawing large sums from a bank machine (to minimize the effect of the standard $3 withdraw fee or whatever it is) the best way to go? That way you get the standard bank rate and that's it? I think the bank rate is probably as good as any conversion house, right?
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Dion

11-04-2008, 03:00 PM

This is more like it! 85 cents is pretty good. I was in the US and got bent over the couch on the extra rate last month. This a healthy level for both the general population and exporters. I can live with 85cents.

This leads to my question: when travelling, what's the best way to buy foreign currency? I'm going to Brazil for the holidays and don't want to buy US$ and then Brazilian reais because you get screwed on the double conversion. Is withdrawing large sums from a bank machine (to minimize the effect of the standard $3 withdraw fee or whatever it is) the best way to go? That way you get the standard bank rate and that's it? I think the bank rate is probably as good as any conversion house, right?

To avoid getting bent over the couch in the future start up a US dollar account and stock up when the dollar is doing well.