High US Dollar

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AltaRed
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Re: High US Dollar

Post by AltaRed »

I believe oil is way more than 3% of GDP and component of our trade balance, and there are the cascading knock on effects. Aussie's currency is also getting hammered as a heavy commodity currency. Add Russia, Brazil, Mexico, Venezuela et al and you get the picture.
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Re: High US Dollar

Post by Flaccidsteele »

AltaRed wrote:I believe oil is way more than 3% of GDP and component of our trade balance, and there are the cascading knock on effects. Aussie's currency is also getting hammered as a heavy commodity currency. Add Russia, Brazil, Mexico, Venezuela et al and you get the picture.
Admittedly I got the 3% of GDP figure (and 14% of exports) from an article in The Economist but they may have quoted it from former PM Stephen Harper. Are there other sources of data to show how big a contributor oil is to Canada's GDP?
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Re: High US Dollar

Post by AltaRed »

More like 10+% in 2014 for energy, but that is all inclusive of all energy.

http://www.nrcan.gc.ca/publications/key-facts/16013
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Re: High US Dollar

Post by Flaccidsteele »

It still seems that oil shouldn't be moving the CAD down so hard. There must be something else happening? I'm sure we'll figure it out in retrospect when this economic period comes to a conclusion.
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Re: High US Dollar

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Flaccidsteele wrote:It still seems that oil shouldn't be moving the CAD down so hard. There must be something else happening? I'm sure we'll figure it out in retrospect when this economic period comes to a conclusion.
Interest rates? Traditionally, when one country is increasing interest rates and another country is decreasing them, money flows from the second to the first. Carry trade and all that...

Plus the U.S. is seen as a safe haven in times of turmoil, and money flows into USD. Notice that the CAD hasn't done nearly as badly against other currencies.

A commenter today was calling for the CAD to bottom out at 58 cents. This forecast is worth every penny we paid for it.

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Re: High US Dollar

Post by Flaccidsteele »

Historically the CAD doesn't stay below $0.70 USD for very long (if at all).
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Re: High US Dollar

Post by AltaRed »

4-5 years is what I see. 1998-2003 or so

http://fxtop.com/en/historical-exchange ... G=en&VAR=0
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Re: High US Dollar

Post by Flaccidsteele »

USD/CAD of 1.6 is a bold outlier prediction. He's definitely going out on a limb. Very doomy.

The Canadian Dollar May Collapse
It's great that Poloz wants to forestall what could be a pretty big recession, but the pre-emptive rate cut only managed to scare some people. I mean, what does he know that we don't?

I have spent a lot of time analyzing Canada and I agree very much with Poloz's assessment. I think things will get very bad. The housing market is very high, and has very far to fall, and nothing probably would have happened except that oil took a 60% digger, and much of Canada's housing market is tied to oil. There are some people who are arguing that Calgary home prices will go down in a vacuum, but that's what people were saying about Phoenix and Vegas, too.

The job numbers have been pretty crappy in Canada for a while, and growth is not great, which is surprising when you consider the degree to which the Canadian consumer has leveraged himself. Not only am I concerned about housing, but I am concerned about retail, too. It's not even a housing story so much as it is a consumer debt story.
Canada facing massive mortgage crisis
Dillian expects the Canadian dollar, currently trading around 1.30 against the US dollar, to drop to 1.60 against the greenback in the wake of the possible raising of interest rates by the US Fed with the Bank of Canada either to cut the rate or leave it at the current 0.5 percent.
If the BoC's mandate is to manage inflation a higher USD/CAD will force the BoC to increase rates IMO.
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Re: High US Dollar

Post by scorpionman »

I'm just curious why QE and negative rates have still resulted in stronger currencies in Japan and Europe but in Canada a slightly above zero rate and no QE has resulted in a lower dollar.
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Re: High US Dollar

Post by Hopetoretire »

Is it time to lock up all "high interest savings" in low interest 5 year GIC's due to possibility of negative interest rates?

http://www.msn.com/en-ca/money/topstori ... li=AAgh0dA

PC just offered me 2.25% on savings from 1st Sept to 31st Dec for new deposits, so wondering if it's worth the effort ...
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Re: High US Dollar

Post by Flaccidsteele »

InvestorNewb wrote: 21 Jan 2015 10:23 Hello,

For many years I earned USD$ in Canada thanks to my business. I kept the majority of that money in USD.

I am pleasantly surprised that as of today, each USD$ is worth $1.2318 CDN. Most of the money is invested in US ETFs. Would it be wise to convert some of that money to CAD or just "let it be"?

I don't really want to sell any of my US ETFs for their CDN counterparts, as it would involve paying taxes on the capital gains. I'm in it for the long-haul but I would hate to see $1 USD = $1 CAD again (or potentially less).
USDCAD = $1.38

I hope you let it be

Back then I was almost 100% sure that the C$ and US$ wasn’t going to hit parity any time soon. It was the tail-end of my US property buying spree and the currency was getting away from me. Fast. There was only so much good luck that I could expect the market to give me. So retracing back to parity didn’t seem likely. And $1.2 or $1.3 wasn’t interesting enough to do anything so I didn’t convert any of my US$ to C$

But if things go $1.4+ I will be much more interested

I find it remarkable that the C$ hasn’t crashed into the 60s like it did in the 1990s. I was in university back then, and didn’t know why our dollar was so low. Anybody have a different perspective on why our C$ was so beaten up back then? Was it the housing crash?

No Respite Seen for Loonie With Oil War, Pandemic Raging On
Credit Suisse said the battle over crude represents a “structural change” for the Canadian dollar and may force the Bank of Canada to consider further monetary policy moves, putting more pressure on the loonie.

Traders are already pricing in another rate cut from Canada’s central bank in April, following its 50 basis point cut, as it tries to counter the potential impact from Covid-19. The economic concern also prompted Prime Minister Justin Trudeau to announce a C$1.1 billion ($800 million) stimulus package Wednesday.

But the fiscal and monetary stimulus may not be enough.
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Re: High US Dollar

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Flaccidsteele wrote: 12 Mar 2020 10:47 I find it remarkable that the C$ hasn’t crashed into the 60s like it did in the 1990s. I was in university back then, and didn’t know why our dollar was so low. Anybody have a different perspective on why our C$ was so beaten up back then? Was it the housing crash?
Canada was close to hitting a debt wall, in terms of debt/GDP ratio. It took a major effort by Chretien and Martin to brink us back from the brink. That is the danger of governments running continuous deficits.
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Re: High US Dollar

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AltaRed wrote: 12 Mar 2020 11:12
Flaccidsteele wrote: 12 Mar 2020 10:47 I find it remarkable that the C$ hasn’t crashed into the 60s like it did in the 1990s. I was in university back then, and didn’t know why our dollar was so low. Anybody have a different perspective on why our C$ was so beaten up back then? Was it the housing crash?
Canada was close to hitting a debt wall, in terms of debt/GDP ratio. It took a major effort by Chretien and Martin to brink us back from the brink. That is the danger of governments running continuous deficits.
+1 Thanks for this

A couple questions:

What debt/GDP ratio constitutes a debt wall?

What would’ve happened if we hit it? Would our bonds be downgraded? Considered junk? Something else?

Speaking of running continuous deficits, it appears that today’s liberal government is different than Chrétien/Martin liberals
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AltaRed
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Re: High US Dollar

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I suggest you do some of your own historical research. Much has been written on it.

One fact to start you off: It wasn't the Chretien Libs that rang up the debt. It was mostly the Mulroney PCs and predecessor gov'ts.
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Re: High US Dollar

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It was Trudeau senior that ran up the debt. Mulroney & company got us out of structural deficit & into an operational surplus. GST (which btw Cretian promised to scrap) & free trade paved way for the Liberals to balance the books - but that's not what they ran on/their first campaign was to run a 2-3% deficit (maintain the debt to GDP ratio) get rid of EH-101 (aka Seaking replacement that finally arrived ed a couple of years ago); undo selling Pearson & other things that cost money to reverse course. Wasn't until the credit markets threatened to stop buying our bonds that they changed direction.
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Re: High US Dollar

Post by Flaccidsteele »

Down the C$ goes...

Why buy toilet paper when you can use the C$
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Re: High US Dollar

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Is anyone here familiar with the Dollar Milkshake theory?

The Dollar Milkshake Theory and its Canadian Implications- Brent Johnson: https://youtu.be/xhGuuuOmPUo
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Re: High US Dollar

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The rise of the US$ is something to watch. Incredible! I thought that the rout of the C$ was largely over. Maybe not. Maybe we’ll see it in the mid-60s soon

King dollar is back
“People are just short of dollars and buying them really at any cost because they are going through situations where—especially more at the investor level—they have to deleverage or de-risk and get to benchmark. So anything that is short of dollars and long some sort of higher yielding currency or emerging market instrument, that’s just being unwound.”

...

Overseas banks had a lot of dollar liabilities on their balance sheets while governments and companies in emerging markets issued a lot of dollar-denominated debt, Graf said. At times of market stress, such as now, emerging market currencies depreciate, which in turn increases their dollar funding liability. That leads to currency swap markets, which are used to borrow dollars short-term to cover those liabilities, getting really stressed, Graf says.

“When those markets get very stressed, oftentimes it doesn’t necessarily lead to direct pressure on the spot market, but right now it is,” he said.

...

Graf says he believes there is a better chance of some form of coordinated intervention to weaken the dollar happening than there was two months ago, but he still has doubts. “The issue is who has dollars to sell? Of course the U.S. does. The other owners of reserve currencies—China, Japan, the euro zone to some degree—are they going to really sell that many dollars and drive their own currencies up that much more, especially China, because that entails selling Treasurys which the U.S. probably doesn’t want them to do?”
Flaccidsteele wrote: 02 Jan 2018 18:03
Flaccidsteele wrote: 01 Jan 2017 02:16Hopes and dreams for 2017: US rents go higher. FED hikes regularly, BoC cuts, Canadian economy deteriorates, and USDCAD increases. If USDCAD hits 1.45+ thinking to refi properties @50% LTV and convert USD proceeds to CAD.
Hopes and dreams for 2018: US rents go higher. Fed hikes regularly, BoC cuts (seems unlikely), Canadian economy deteriorates (seems unlikely), and USDCAD increases (unknown). No longer interested in refi properties.
Financially speaking, Christmas has arrived early
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Re: High US Dollar

Post by bcjmmac »

Aussie $ is below 60 and some forecasters speculate it could get to mid 40s or lower (beat the all time minimum).
When I worked in Aus, value varied from even to ~.9 CAD
They are also a resource economy albeit with closer ties to Chinese markets.
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Re: High US Dollar

Post by formerpatriot »

Title of this thread should be "Low US Dollar".

A year ago: 1 USD = 1.38 CAD.
Today: 1 USD = 1.22 CAD.
Painful for my 401(k)! :(
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Re: High US Dollar

Post by AltaRed »

This, too, will pass. The CAD has been everywhere from circa 65 cents to 105 cents versus the USD in the past 25 years. Just have to have longer term view than a year at a time.

Added: Historical CAD/USD rate chart. Click on 25 year or All (about 29 years) to see the variability. I have been investing for over 30 years, been there and seen it all. I still will not hedge the currency for reasons I have articulated a number of times.
Last edited by AltaRed on 06 May 2021 11:47, edited 2 times in total.
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Re: High US Dollar

Post by Koogie »

It is annoying for me as I earn my business income in USD primarily. However, it is also helping fuel capital expenditures in forestry and mining equipment as endusers are purchasing more Canadian manufactured equipment, so business is up.

"May you live in interesting times" indeed...
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Re: High US Dollar

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Koogie wrote: 06 May 2021 11:29 It is annoying for me as I earn my business income in USD primarily.
My business faced an existential issue some 20-25 years ago when the exchange rate moved some 25% over a few years. We couldn't raise our prices by anywhere near that so we had to suck it up. And suck it up we did, ultimately surviving--barely. (Imagine trying to explain to a US customer that you're raising your prices by 10%, let alone more, because of currency fluctuations...)

Contrast with many Canadian businesses (and the politicians who pander to them) who scream bloody murder whenever some tax goes up a point or two. If they can't handle relatively minor stuff like that they don't deserve to stay in business.
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Re: High US Dollar

Post by bizkitgto »

Bylo Selhi wrote: 06 May 2021 12:55
Koogie wrote: 06 May 2021 11:29 It is annoying for me as I earn my business income in USD primarily.
My business faced an existential issue some 20-25 years ago when the exchange rate moved some 25% over a few years. We couldn't raise our prices by anywhere near that so we had to suck it up. And suck it up we did, ultimately surviving--barely. (Imagine trying to explain to a US customer that you're raising your prices by 10%, let alone more, because of currency fluctuations...)

Contrast with many Canadian businesses (and the politicians who pander to them) who scream bloody murder whenever some tax goes up a point or two. If they can't handle relatively minor stuff like that they don't deserve to stay in business.
I'd be more angry with the politicians allowing the CAD to fluctuate 25% in a short period of time.
And Trudeau & Co. seem to be on a warpath to print more and more $$$.
Who is going to want to own the Canadian dollar in 5 years?
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Re: High US Dollar

Post by AltaRed »

Every OECD country is printing money so misery loves company. It is all relative. FWIW, what is happening currently is a slide in the USD relative to the CAD and Euro. CAD vs Euro is pretty steady.

As long as the broader commodity market is strong (lumber, copper, oil, etc), the loonie will be strong relatively speaking.
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