posted by 4x-news on Nov 3

    The Canadian Dollar, or Loonie, recently cleared a 47-year high against the US Dollar.  Its next major milestone is crossing a level last seen in the late 19^th century! There are a few reasons for the Loonie’s continued strength, namely interest rate parity and economic strength.  As a result of the Fed cutting rates for the second time in as many months, the Canadian benchmark interest rate is now equal to the American federal funds rate, both at 4.5%.  In addition, record-breaking oil and commodity prices will ensure that Canada’s economy will expand further, perhaps as the same pace as its currency.  Reuters reports:

If the U.S. Central bank signals another rate cut in December, or if it goes against expectations and chops rates by 50 basis points, it could pull the rug out from under an already unsteady U.S. dollar and clear the way for the Canadian currency to shoot higher.

posted by 4x-news on Oct 30

Australia’s benchmark interest rate, at 6.50%, is already the highest in the industrialized world, after New Zealand. Ignoring the pleas of the Treasurer, the Central Bank of has all but decided to hike rates even further into the stratosphere at its next meeting.  The country is in a bit of a pickle, since a booming economy and the consequent inflation seems to demand a rate hike.  At the same time, this rate hike will ensure that Australia continues to be on the receiving end of Japanese carry trades, and this is precisely what irks Peter Costello, Australia’s Treasurer. In other words, the world’s massive economic imbalances will only be exacerbated by an Australian rate hike, but this may be a moot point as far as the Central Bank is concerned.  The Sydney Morning Herald reports:

Instability on global financial markets between now and the next Reserve Bank board meeting on Melbourne Cup day is seen by economists as the only force that could stay the bank’s hand from raising rates to the highest level in a decade.

posted by 4x-news on Sep 24

    Over the last five years, the Canadian Dollar has slowly climbed to parity against the USD, finally reaching the mythical 1:1 exchange rate last week. Canadian shoppers and American tourists have taken notice, gradually adjusting their behavior in accordance wit their changing purchasing power. For many Canadians, this has translated into more frequent shopping trips across the border, whether for gasoline or for clothing. For Americans, this has resulted in a decline in the number of tourists visiting Canada. It is also slowly redefining the US-Canada trade dynamic. However, as Canada has become the United States’ largest supplier of oil, it is likely Canada that will benefit most in this relationship. The New York Times reports:

The weakness of the American dollar worries some Canadian investors as well as businesses that rely on American customers.