Loonie falls on election polling, lower commodity prices - Macleans.ca
 

Loonie falls on election polling, lower commodity prices

Possible Layton-led coalition “weighs on dollar”: analysts


 

The Canadian dollar fell more than a third of a cent from 1.0534 US to 1.0500 US on opening today after reaching a 43-month high on Friday. The slip can be partially attributed to weaker commodity prices following news of Osama bin Laden’s death. But it can also be partially attributed to the increasing possibility of an NDP-led coalition after today’s vote, say analysts. A Layton-led coalition would lead to increased spending that would “increase the risk premium on Canadian debt,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman told the Wall Street Journal on Monday.

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Loonie falls on election polling, lower commodity prices

  1. Good! I'd like to see our looney at around 80 cents and bring back some trade with the US and increase investment.

    • There seem to be many voters who believe that having a Canadian dollar over par is a sign of a healthy economy. Every single Ontario voter should recognize the absolute danger that's presented by this state of affairs. It only really benefits a resource-driven economy with an inelastic demand, such as oil producers. Once Canadian firms responded to the initial spike in the Canadian dollar with some low-priced capital upgrades, they really need to it drop a bit in order to become competitive again, especially with the greenback dropping like a stone. Canadian manufacturers are getting clobbered in all kinds of markets.

      • It impacts the resource sector too, as you say (imported) capital inputs are cheaper, but a high $CAD means lower Canadian revenues from the sale of commodities priced in $USD.

      • At the same time, I don't see Canadian retailers adjusting their sticker prices to reflect the increased value of the dollars they're collecting from consumers. Will it take a mass migration of Canadian buyers to cross-border outlets and on-line (American) sites to get retailers to pass along their "savings"?

      • Canadian manufacturers have been relying on the low dollar as a cushion for far too long. The high Canadian dollar presents benefits for Canadian manufacturing over the long term; those companies who can restructure, and become profitable with the dollar at current levels, will become even more profitable if it happens to drop in the future.

        • The dollar at 65 cents was too low. The dollar at 1.05 is almost certainly too high. Manufacturers don't need the currency to be a crutch, but they also don't need it to be an insurmountable barrier.

          What you're saying is certainly true, that these firms must adapt. But what must also be recognized is the implicit assertion that this adaption will include a reduction in manufacturing output, wages, and significant cost cutting. It's necessary for the manufacturing sector as a whole, but will impact Ontario's economy in aggregate in the short-medium term.

          • "The dollar at 65 cents was too low. The dollar at 1.05 is almost certainly too high."

            People often make claims that the dollar is too low or too high at certain price levels, but I've never seen any evidence of an optimal exchange rate. Is there a paper or analysis that you've based your comments on? I'd like to know more about this subject.

            I do suppose, however, that unless certain policies are enacted to target a certain USD exchange rate, the optimal rate question is moot. Of course, monetary policies like that would never be enacted because, just guessing, they'd probably wreak havoc on interest rates and the money supply.

  2. BMO and Scotiabank have both issued warnings about the economic consequences of a NDP led coalition.

  3. At least such a coalition will bring the loonie down. Do we think there is a plot afoot?

  4. Analysts would be much happier if the NDP found the same magic money tree to shake as the Conservatives.

  5. This article seems a blatant attempt to alter the outcome of the election.

    I can't believe posting something like this on election day isn't illegal.

    Shame on you McCleans.

  6. Absolutely, which is why I was so frustrated that none of these issues came out during the campaign. I guess campaigns are just inappropriate times for complex discussions.

  7. Um first of all this article is in contravention of election Canada guidelines that publications should not attempt to sway minds on election day. Macleans better pull this article or they’re gonna get fined by elections Canada.

    Secondly, when you say the Canadian dollar is “down” today, you mean it’s down relative to the US dollar. I wonder what possibly happened in the last 24 hours that could give investors a better outlook on America?? Apparently something about some guy in Pakistan biting the bullet? All I know is the video of crowds of people flooding into the street chanting “USA! USA!” is bound to rub off on investors and lead them to buying US dollars, which in turn “weakens” our dollar in relation.

    Bottom line: tiny decline in our dollar relative to American dollar had nothing to do with the NDP as this site lies, and everything to do with the US finally killing the most wanted terrorist in the world.