Quote:
Originally Posted by Lanny_MacDonald
I think that if you look at the Canadian buck you will see that it is the poor performance of the American buck that has caused the gains, not the positive performance of the Canadian buck itself. The US buck will rebound and reverse the slide it took against other currencies, and when it does, the Canadian buck will tumble. Take a look at the charts of the performance of the two currencies versus others. In 2003, the American buck was worth close to $1.07 in Euro dollars, and now it's worth 70 cents. Conversely, in 2003 the Canadian buck was worth ~67 cents in Euro dollars, and today its worth ~70 cents. The gains are because of the poor performance of the US buck. When it rebounds against the Euro, the Canadian buck will slide backwards again.
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Except that traditionally the Canadian dollar and the American dollar have moved together (sometimes at different rates of movement, but more or less in the same direction at the same time) up until recently.
The fact that the Canadian dollar has moved up on the American dollar despite weakness in Canada's primary export market would indicate that a hot American economy that was consuming even more resources would just make the Canadian dollar even hotter!
The American economy is in potentially a lot more trouble than many are making it out to be.
And the Canadian economy has never been in better shape at the fundamental level. Expanded market demand for primary exports, little threat of Quebec seperation, balanced budgets, lower and lower debt, net exporter of energy, more competitive tax rates and better city infrastructure than many decaying American cities, etc.
Lower productivity in Canada is the primary threat to the dollar but wise use of the higher dollar should help close that gap too.
I agree the Canadian dollar will likely drop a bit again, but i would be shocked to see it fall out of a very tight range of trading (0.93-1.07 or even 0.95-1.02) compared to the USD and has more chances for upside than downside IMO.
Major policy changes are needed in the United States post Bush-nightmare to fix things....
Claeren.