http://www.canadian-business.info/economy/loonie-hits-record/ News, Markets and Economy - a Canadian Perspective Thu, 28 Aug 2008 15:13:03 +0000 http://wordpress.org/?v=2.2.1 http://www.canadian-business.info/economy/loonie-hits-record/#comment-143 Bob B Tue, 06 Nov 2007 18:35:26 +0000 http://www.canadian-business.info/economy/loonie-hits-record/#comment-143 The loonie in my view is currently trading at around 14% above its true value against the greenback and that is based putely on this year's fundamentals: interest rate differentials; trade numbers; GDP; commodity prices. The rise we have seen in the past 2 months(13.5% rally)is unprecedented and is primarily driven by speculators. Every loonie bear has been banished and the currency's rate of appreciation has reached what can only be described as farcical proportions. Canada's economy will pay a heavy price for this, particularly as the economic outlook for the global economy is looking more and more uncertain, let alone in the US. The Bank of Canada has to step in and step in now, to put a pin in this massive speculative bubble, that the Canadian dollar has become. There is no point in waiting until the first quarter of 2008, because by then it will be too late, not only for manufacturers and exporters, but also for domestic producers who now have a whole new sphere of competition to worry about. Canada's productivity levels are too far off the pace to enable the economy adapt quickly enough to deal with the pace of the competition threat. The Bank of Canada needs to force the speculative element of the loonie's value to the exits, so the economy can at least have some chance to adjust to the challenges ahead. The loonie in my view is currently trading at around 14% above its true value against the greenback and that is based putely on this year’s fundamentals: interest rate differentials; trade numbers; GDP; commodity prices. The rise we have seen in the past 2 months(13.5% rally)is unprecedented and is primarily driven by speculators. Every loonie bear has been banished and the currency’s rate of appreciation has reached what can only be described as farcical proportions. Canada’s economy will pay a heavy price for this, particularly as the economic outlook for the global economy is looking more and more uncertain, let alone in the US. The Bank of Canada has to step in and step in now, to put a pin in this massive speculative bubble, that the Canadian dollar has become. There is no point in waiting until the first quarter of 2008, because by then it will be too late, not only for manufacturers and exporters, but also for domestic producers who now have a whole new sphere of competition to worry about. Canada’s productivity levels are too far off the pace to enable the economy adapt quickly enough to deal with the pace of the competition threat. The Bank of Canada needs to force the speculative element of the loonie’s value to the exits, so the economy can at least have some chance to adjust to the challenges ahead.

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