Tuesday, April 6, 2010

Canadian Dollar Hits Parity with US Dollar for First Time Since July 2008

A lot of trades - especially of the commodity kind - seem to be picking up right where they left off pre-Lehman, AIG, Fannie, Freddie.  Canada is one of those countries with a heavy emphasis on said commodities.  [Oct 2, 2009: David Rosenberg Makes Case for Canada as Low Beta Emerging Market Play]  We pointed out late last year there was some hand wringing occurring as the Canadian dollar was in sight of parity with the US dollar.  [Oct 15, 2009: NYT - Anxiety in Canada over Near Parity with US Dollar]  For the first time since July 2008, it has happened

In a related note, Timothy Geithner just repeated the US strong dollar policy... ahem.
  • The Canadian dollar rose to one-for-one footing with the U.S. currency on Tuesday, hitting its strongest level since July 2008, boosted by rising commodity prices and expectations for higher domestic interest rates.
  • "It's been heading toward parity for weeks and it was inevitable. There's no surprise," said Jon Gencher, director of foreign exchange sales at BMO Capital Markets.  Canada’s dollar, dubbed the loonie for the aquatic bird on the C$1 coin, last traded at par with the greenback on July 22, 2008, 11 days after crude, the country’s biggest export, reached a record $147.27 a barrel.
  • Canadian economic fundamentals and an improving international economic outlook have provided support for the Canadian dollar as a string of stronger-than-expected data raised expectations for higher interest rates.
  • The Bank of Canada has a conditional pledge to hold the key interest rate at an all-time low of 0.25 percent until the end of June, provided inflation stays tame, but market players have begun to price in an earlier rate hike as the economy heats up fast after the recession.
  • "The Canadian dollar remains better placed on almost every front, including the monetary policy outlook, a healthy banking system and rising commodities," said Audrey Childe-Freeman, strategist at Brown Brothers Harriman.
  • The central bank will boost its target overnight rate by 2 percentage points to 2.25 percent by the middle of next year, according to the weighted average of eight economists in a Bloomberg News survey of economists.
  • Canadian employers added 25,000 jobs in February, the third straight monthly gain.
  • The loonie traded on a one-for-one basis with the U.S. currency in September 2007 for the first time in three decades, capping a five-year run on the back of booming demand for the nation’s commodities.
  • Canada, the largest trading partner of the U.S., has benefited over that period from rising demand for copper, gold, wheat and oil from the U.S. and emerging economies such as India and China. The country is the world’s largest producer of uranium, the second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada is also the world’s second-largest exporter of wheat.
  • Canada is on course to be the first Group of Seven nation to erase its budget gap after the global financial crisis. Finance Minister Jim Flaherty presented on March 4 a budget that forecasts the budget deficit narrowing to C$1.8 billion ($1.78 billion) in 2014 from a record C$53.8 billion last year.
  • Commodity producers including Australia, Brazil and Canada are forecast by strategists to grow faster than larger economies such as the U.S. and Europe as China’s accelerating expansion drags the world out of its worst slump since World War II, pushing up prices for raw materials.

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