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Loonie against the Greenback....ever going to be on par again?

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  • Mar 5th, 2014 5:17 am
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Jul 6, 2011
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Loonie against the Greenback....ever going to be on par again?

This is pathetic, and not even worth crossing the border anymore to buy stuff....by the time you add gas etc

http://www.ctvnews.ca/business/canadian ... -1.1708203

Are we ever going to see a return of what happened in 2004/2005 when the loonie went all the way to 1.20 - 1.135 against the greenback?
23 replies
Deal Guru
May 1, 2012
10538 posts
11427 upvotes
Toronto
If you look at last week's performance, the loonie has been going up and down all week between 89.6 and 90.7 cents. This is hardly anything. The greenback is only weakening slightly due to the crappy US growth reports. Blimp at the very best.

If anyone could predict the movement of either currency accurately, then that person could become a very rich man.
Member
Mar 27, 2009
264 posts
50 upvotes
Sorry, but this is a silly comment/thread. What you are saying is that you want a stronger Canadian dollar (which is generally hurtful to the Canadian economy) so that you can spend your money in the United States (which is hurtful to Canadian retailers)? So, basically your attitude and position is "F-ck Canada"?
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Jun 28, 2007
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Never say never, but the fundamentals don't suggest the loonie returning to parity or above any time soon. There is another thread on the subject somewhere else here, but basically the US is in the midst of tightening (extremely loose) monetary policy via tapering, while the bias for to tighten by the Bank of Canada has been removed. The net impact is capital flowing back to the US and supporting the USD. You also have secondary factors such as soft commodity price growth which is taking some of the steam out of the loonie as well.

That all said, a loonie in the 90 US cent range is not that bad, and based on a number of purchasing power parity models, this is effectively where the fundamental value of the loonie should be. Basically, anything above 94 US cents means our currency is overvalued (and by extension means that its great for cross border shoppers, but equally bad for firms selling goods into the US in USD).
Deal Expert
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Oct 26, 2003
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Winnipeg
gomyone wrote: Never say never, but the fundamentals don't suggest the loonie returning to parity or above any time soon. There is another thread on the subject somewhere else here, but basically the US is in the midst of tightening (extremely loose) monetary policy via tapering, while the bias for to tighten by the Bank of Canada has been removed. The net impact is capital flowing back to the US and supporting the USD. You also have secondary factors such as soft commodity price growth which is taking some of the steam out of the loonie as well.

That all said, a loonie in the 90 US cent range is not that bad, and based on a number of purchasing power parity models, this is effectively where the fundamental value of the loonie should be. Basically, anything above 94 US cents means our currency is overvalued (and by extension means that its great for cross border shoppers, but equally bad for firms selling goods into the US in USD).
what's this fundamentals you are talking about? I hear about it all the time, please elaborate?
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Aug 29, 2012
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PaterFamilias wrote: Sorry, but this is a silly comment/thread. What you are saying is that you want a stronger Canadian dollar (which is generally hurtful to the Canadian economy) so that you can spend your money in the United States (which is hurtful to Canadian retailers)? So, basically your attitude and position is "F-ck Canada"?
A significant portion of what we purchase are imports, so we realize it has direct impact on our budgets.
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Jun 28, 2007
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divx wrote: what's this fundamentals you are talking about? I hear about it all the time, please elaborate?
..fundamentals drivers of the C$ were already mentioned: interest rates spreads, commodity prices and the relative gov't fiscal position.

as for purchasing power value - its a difficult concept to measure but its effectively estimating what the exchange rate between two currencies would have to be in order for the exchange to be on par with the purchasing power of the two countries' currencies - in other words its the "fair value" for a currency. In Canada's case, purchasing power parity has been estimated at around 90 US cents, which is also where the C$ is currently trading at.
Deal Expert
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Oct 26, 2003
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Winnipeg
make sense, PPP is a measurement of true value in term of goods, so the exchange rate should reflect that, in that case our currency is exchange fairly with the USD$.
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Feb 25, 2014
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Mississauga
Unless BoC raises interest rate by 100 bps
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Jun 28, 2007
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MehtabS wrote: Unless BoC raises interest rate by 100 bps
Highly unlikely IMHO
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Oct 26, 2003
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gomyone what's wrong with the euro? their PPP and economy is definitely in a worse shape than us and the states, so why is the euro exchange above parity?
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Feb 25, 2014
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divx wrote: gomyone what's wrong with the euro? their PPP and economy is definitely in a worse shape than us and the states, so why is the euro exchange above parity?
It all depends on how Germany is doing..
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Jun 28, 2007
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divx wrote: gomyone what's wrong with the euro? their PPP and economy is definitely in a worse shape than us and the states, so why is the euro exchange above parity?
..like :arrowu: said - it depends on Germany, but also all the other Euro countries (Italy Greece etc). If it was just Italy and Greece then it would definitely be in worse shape - unfortunately with a currency and monetary union, those peripheral countries can free ride on the better countries. That said, the Euro did come down dramatically through the Euro crisis. But it can only go so far too, given that its a reserve currency too.
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Jul 6, 2011
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England needs to back out of this Euro nonsense and stick to the POUND. I mean that use to be close to $3 exchange when I first moved here

gomyone wrote: ..like :arrowu: said - it depends on Germany, but also all the other Euro countries (Italy Greece etc). If it was just Italy and Greece then it would definitely be in worse shape - unfortunately with a currency and monetary union, those peripheral countries can free ride on the better countries. That said, the Euro did come down dramatically through the Euro crisis. But it can only go so far too, given that its a reserve currency too.
Sr. Member
Feb 5, 2009
664 posts
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PaterFamilias wrote: Sorry, but this is a silly comment/thread. What you are saying is that you want a stronger Canadian dollar (which is generally hurtful to the Canadian economy) so that you can spend your money in the United States (which is hurtful to Canadian retailers)? So, basically your attitude and position is "F-ck Canada"?
On the other hand... selling for $500USD nets you ~$540CDN

Score!
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Jul 6, 2011
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What have retailers done for you lately? If you are going to get on that soapbox, why is it then that people support the NFL, as opposed to the CFL US NHL teams as opposed to Canadian ones...bet you are going to tell me that is different? It's all about looking after numero uno amigo

I am sure you've taken advantage of deals in the US before, if not you someone close to you
PaterFamilias wrote: Sorry, but this is a silly comment/thread. What you are saying is that you want a stronger Canadian dollar (which is generally hurtful to the Canadian economy) so that you can spend your money in the United States (which is hurtful to Canadian retailers)? So, basically your attitude and position is "F-ck Canada"?
Deal Fanatic
Jan 21, 2014
8517 posts
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On the similar note, you know you could convert your money CAD to USD or USD to CAD at almost spot rate if you have a trading account? I used to call TDW or RBC got them to convert, they charged me roughly $0.015 per dollar compared with spot rate. Now I just buy/sell a dual listing security and paid only $20 for commissions and got my money converted. I did it a few times already. Of course you pick a liquid stock with narrrow spreads and only if $20 is less than 1.5% of the total amount
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Jul 6, 2011
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Hmmmm...Interesting, something to think about
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Dec 16, 2012
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toopence wrote: What have retailers done for you lately? If you are going to get on that soapbox, why is it then that people support the NFL, as opposed to the CFL US NHL teams as opposed to Canadian ones...bet you are going to tell me that is different? It's all about looking after numero uno amigo

I am sure you've taken advantage of deals in the US before, if not you someone close to you
My thoughts exactly. I work hard for my money and I want to keep as much as possible so I can enjoy life. It's just like when you hear "oh since the dollar is so high tourism is down as the Americans can't come here anymore".

My answer is "So?", why would I want the dollar to go so far down so the hotels and everything can get more money and the owners and such can have the nice life, while I sit at home and can't go anywhere because it would cost so much more just due to exchange.
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Feb 15, 2008
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We've had a few threads on this, but there's plenty of evidence that the CAD/USD pair will go back to parity, and beyond in the not-so-distant future. If you review the CoT reports, it seems that there is extreme leveraged speculator sentiment against the CAD$, which usually is a good contrarian sign. Oil, gold, etc. are ramping up. Commercials (actual users of CAD$) are significantly net long CAD$, which is a reflection of the real supply and demand fundamentals.

I personally believe CAD/USD is on a longer-term cycle, in which "par" is the pivot point, and one extremity of the cycle was 63 cents USD / CAD. The other extremity is likely to be the inversion of such, ie: $1.50+ USD per CAD$. A strong CAD$ would be the result of domestic deflation, and US inflation -- as well as significant sentiment against the USD$.

So my advice -- if you're planning a vacation to the US in the next year or two, yeah, you should dollar cost average your purchases because predicting short term movements is a mug's game. If you're planning on building a factory and operate it for the next 30 years in Canada on the theory that the CAD$ will be devalued or will even stay at the currently low value -- you will likely be significantly disappointed when the CAD$ surges against the USD$, reflecting the far superior economic fundamentals of Canada.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...

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