Congratulations, Canada!

[drone]

http://www.forbes.com/feeds/ap/2007/...ap4140059.html

Spoiler Alert, click show to read: 

The Canadian dollar reached parity with the U.S. dollar on Thursday for the first time since November 1976.

Known as the loonie because of the bird pictured on the one-dollar coin, the Canadian dollar has been gaining ground on its American counterpart since hitting an all-time low of 61.79 U.S. cents on Jan. 21, 2002.

This week the loonie rose sharply against its U.S. counterpart after the Federal Reserve announced a dramatic half-point cut in its benchmark interest rates. The Bank of Canada, meanwhile, has kept its equivalent rates stable.

As a result, the spread between U.S. and Canadian interest rates widened, making Canada a more attractive place for German, Japanese, American and other foreign investors to put their money.

http://finance.google.com/finance?q=CADUSD
Today, the Canadian dollar reached parity with the US dollar. No more jokes about Canadian "monopoly money" and such. Now come south of the border and buy stuff, because our economy needs a kick!

[CrossLOPER]

Enjoy your slightly more valuable monopoly money.

[Mikeus Caesar]

I am British, and in my eyes you all use monopoly money!

Fear my vastly more valuable currency!

Fear it!

[Odin]

This is great news, because the lower the dollar goes the more expensive foreign goods become. That helps reduce the trade deficit as well as curb out of control consumption. And the icing on the cake? Less immigration, thats right if the dollar is weaker against other currencies the logical assumption would be that the higher valuaed currency country would attract those immigrants.

Indeed congradulations, here is hoping it surpasses the dollar soon.

[Xiahou]

This is great news, because the lower the dollar goes the more expensive foreign goods become. That helps reduce the trade deficit as well as curb out of control consumption. And the icing on the cake? Less immigration, thats right if the dollar is weaker against other currencies the logical assumption would be that the higher valuaed currency country would attract those immigrants.

Indeed congradulations, here is hoping it surpasses the dollar soon.

Yup, it makes American crap cheaper for everyone else to buy. Hard to get upset about that.

I guess if I were planning on traveling abroad, it would suck- but I'm not, so it doesn't.

[Proletariat]

Damn it.

Dollar plunges through $1.40 against euro

By Peter Garnham

Published: September 20 2007 11:22 | Last updated: September 20 2007 11:22

The dollar dropped to record lows through the $1.40 level against the euro on Thursday as the US currency continued its slide following the Federal Reserve’s decision to cut interest rates earlier in the week.

“The key $1.40 level has been breached and dollar weakness is evident across all currency pairs reflecting the prospect of a move in interest rate differentials against the currency,” said Derek Halpenny at Bank of Tokyo-Mitsubishi.

http://www.ft.com/cms/s/0/e331d7f2-6...0779fd2ac.html

Guess I'll be buying 40$ putanesca in Italy next week.

[Xiahou]

Damn it.


http://www.ft.com/cms/s/0/e331d7f2-6...0779fd2ac.html

Guess I'll be buying 40$ putanesca in Italy next week.

Should've exchanged your money before the Fed meeting.

[Tribesman]

Yup, it makes American crap cheaper for everyone else to buy. Hard to get upset about that.

That would rely on people wanting to buy crap , and for Odins balance thing it would rely on you being willing to not buy good stuff .
I find it hard to fathom how you are happy with the fall in currency when your government spent lots effort trying to keep it up .

[Xiahou]

That would rely on people wanting to buy crap , and for Odins balance thing it would rely on you being willing to not buy good stuff .
I find it hard to fathom how you are happy with the fall in currency when your government spent lots effort trying to keep it up .

Are you dreaming? A weak dollar has been the administration's unofficial policy almost from the beginning.

[Tribesman]

Are you dreaming? A weak dollar has been the administration's unofficial policy almost from the beginning.

Oh I see , so all those recent measures to stop the slide were actually part of a policy to increase slide

[Ice]

That would rely on people wanting to buy crap , and for Odins balance thing it would rely on you being willing to not buy good stuff .
I find it hard to fathom how you are happy with the fall in currency when your government spent lots effort trying to keep it up .

http://www.chicagofed.org/consumer_i...eak_dollar.cfm

Taken from the Federal Reserve Bank of Chicago:

The terms strong and weak, rising and falling, strengthening and weakening are relative terms in the world of foreign exchange (sometimes referred to as "forex"). Rising and falling, strengthening and weakening all indicate a relative change in position from a previous level. When the dollar is "strengthening," its value is rising in relation to one or more other currencies. A strong dollar will buy more units of a foreign currency than previously. One result of a stronger dollar is that the prices of foreign goods and services drop for U.S. consumers. This may allow Americans to take the long-postponed vacation to another country, or buy a foreign car that used to be too expensive.

U.S. consumers benefit from a strong dollar, but U.S. exporters are hurt. A strong dollar means that it takes more of a foreign currency to buy U.S. dollars. U.S. goods and services become more expensive for foreign consumers who, as a result, tend to buy fewer U.S. products. Because it takes more of a foreign currency to purchase strong dollars, products priced in dollars are more expensive when sold overseas.

Strengthening Dollar
Advantages

* Consumer sees lower prices on foreign products/services.
* Lower prices on foreign products/services help keep inflation low.
* U.S. consumers benefit when they travel to foreign countries.
* U.S. investors can purchase foreign stocks/bonds at "lower" prices.

Disadvantages

* U.S. firms find it harder to compete in foreign markets.
* U.S. firms must compete with lower priced foreign goods.
* Foreign tourists find it more expensive to visit U.S.
* More difficult for foreign investors to provide capital to U.S. in times of heavy U.S. borrowing.

Weakening Dollar
Advantages

* U.S. firms find it easier to sell goods in foreign markets.
* U.S. firms find less competitive pressure to keep prices low.
* More foreign tourists can afford to visit the U.S.
* U.S. capital markets become more attractive to foreign investors.

Disadvantages

* Consumers face higher prices on foreign products/services.
* Higher prices on foreign products contribute to higher cost-of-living.
* U.S. consumers find traveling abroad more costly.
* Harder for U.S. firms and investors to expand into foreign markets.

A weak dollar also hurts some people and benefits others. When the value of the dollar falls or weakens in relation to another currency, prices of goods and services from that country rise for U.S. consumers. It takes more dollars to purchase the same amount of foreign currency to buy goods and services. That means U.S. consumers and U.S. companies that import products have reduced purchasing power.

At the same time, a weak dollar means prices for U.S. products fall in foreign markets, benefiting U.S. exporters and foreign consumers. With a weak dollar, it takes fewer units of foreign currency to buy the right amount of dollars to purchase U.S. goods. As a result, consumers in other countries can buy U.S. products with less money.

Ideally, the dollar and all nations' currencies should be valued at a level that is neither too high nor too low. Such a level would help sustain long-term economic growth and stability both here and abroad. However, this ideal is difficult to reach since many factors affect the value of a nation's money. Some of the factors are complex, but many are quite simple.

So, if you buy American and don't leave the country, this is a very good thing.

Sorry Prole. I thought 1.36 Dollars/Euro was bad this summer. Looks like you are getting slammed.

[Ice]

Oh I see , so all those recent measures to stop the slide were actually part of a policy to increase slide

What do you mean?

[Xiahou]

Oh I see , so all those recent measures to stop the slide were actually part of a policy to increase slide

As usual, I have no idea what you're talking about.

However, you can read up about it, if you want to.

[Blodrast]

http://www.forbes.com/feeds/ap/2007/...ap4140059.html

http://finance.google.com/finance?q=CADUSD
Today, the Canadian dollar reached parity with the US dollar. No more jokes about Canadian "monopoly money" and such. Now come south of the border and buy stuff, because our economy needs a kick!

What you say!
The google link shows me that:

1 CAD = 0.999 USD +0.0122 (1.239%) Sep 20, 8:00PM - View USD in CAD

Lies, I tell you! Lies!

*goes back to playing monopoly*

[Tribesman]

So, if you buy American and don't leave the country, this is a very good thing.

Not when your counrty has to import so much .
Take the currency of the country at the start of the topic , You buy lots of stuff from Canada more imports higher prices and your dollar doesn't buy as much ....oil gas copper.thats a double since money is shifting into that and away from the USD so its going up , going up and you need , more dollars to buy it .
Hey it might be a good thing for you if your country was exporting more instead of importing , but it isn't .

[Husar]

http://www.oanda.com/convert/classic?lang=en says:

1 Canadian Dollar = 0.98706 US Dollar

1 US Dollar (USD) = 1.01311 Canadian Dollar (CAD)

[drone]

If the dollar can stay low, it will encourage more local manufacturing, but this will take some time to build up. Imported necessities (mainly oil) are going to become more costly though.

[Xiahou]

If the dollar can stay low, it will encourage more local manufacturing, but this will take some time to build up. Imported necessities (mainly oil) are going to become more costly though.

Stop me if I'm wrong, but hasn't oil been traded in dollars since the 1970's?

[Ronin]

Stop me if I'm wrong, but hasn't oil been traded in dollars since the 1970's?

yes...but if the value of the dollar is worth less compared to say the Saudi Riyal the Saudi´s are gonna want more of your weaker American dollars for their oil drums.....after all you´re paying them with a weaker currency

just because the prices are all set in dollars doesn´t mean gas won´t become more expensive for you guys

[Xiahou]

yes...but if the value of the dollar is worth less compared to say the Saudi Riyal the Saudi´s are gonna want more of your weaker American dollars for their oil drums.....after all you´re paying them with a weaker currency

just because the prices are all set in dollars doesn´t mean gas won´t become more expensive for you guys

Maybe, but I don't think it's as simple as that. Oil is traded in dollars. So, a weaker dollar would mean cheaper oil for non-dollar economies. Cheaper oil could lead to greater demand. Finally, greater demand could lead to increased oil prices.

A weaker dollar could lead to higher oil prices, but it's not as direct a correlation as the dollars to riyal exchange rate.

[Tribesman]

Stop me if I'm wrong, but hasn't oil been traded in dollars since the 1970's?

Yes and Opec countries since the 1970s have a policy of setting the price in dollars at the actual worldwide purchasing power of those dollars , if the dollar doesn't buy much then it cost a lot of dollars to buy things and Opec set their "dollar" prices to reflect that .

I understand why you think the weak dollar is good , but given the massive debts , the huge budget deficit and reliance on imports of both goods and commodities (plus services) it is a very risky step , not a step that I would trust the current incompetants with .
And since the weak currency measures will only work as a very very long term program can you see the electorate being willing to put up with that much for so long .

[Tribesman]

A weaker dollar could lead to higher oil prices, but it's not as direct a correlation as the dollars to riyal exchange rate.

Yes it is , see above....if 1 dollar is worth 1 riyal the oil barrel price relects that , if 2 dollars buy 1 riyal the barrel price goes the same way .
It has for the past 35 years

[Xiahou]

Yes and Opec countries since the 1970s have a policy of setting the price in dollars at the actual worldwide purchasing power of those dollars , if the dollar doesn't buy much then it cost a lot of dollars to buy things and Opec set their "dollar" prices to reflect that .

"One of the most common misconceptions about OPEC is that the Organization is responsible for setting crude oil prices. Although OPEC did in fact set crude oil prices from the early 1970s to the mid-1980s, this is no longer the case. It is true that OPEC's Member Countries do voluntary restrain their crude oil production in order to stabilize the oil market and avoid harmful and unnecessary price fluctuations, but this is not the same thing as setting prices.

In today's complex global markets, the price of crude oil is set by movements on the three major international petroleum exchanges, all of which have their own Web sites featuring information about oil prices"

link
They can and do engage in supply manipulation, but they do not set the price of oil.

I understand why you think the weak dollar is good , but given the massive debts , the huge budget deficit and reliance on imports of both goods and commodities (plus services) it is a very risky step , not a step that I would trust the current incompetants with .
And since the weak currency measures will only work as a very very long term program can you see the electorate being willing to put up with that much for so long .

But it's not a new step. It's been happening virtually the entire time Bush has been in office. Also, a weak dollar should be deficit friendly, as it encourages foreign investment.

The trick is in keeping a weak dollar from becoming a free-falling dollar. But it's something they've either been very lucky or good at thus far.

[Tribesman]

They can and do engage in supply manipulation, but they do not set the price of oil.

Since the price of oil is mainly set by supply and demand and they regulate most of the the supply they do effectively set the price of oil .

Also, a weak dollar should be deficit friendly, as it encourages foreign investment.

It is not defecit friendly when you are a major importer , if it is encouraging foriegn investment than how is Canadian copper getting a big influx and why are Asian countries investing more in Europe .

The trick is in keeping a weak dollar from becoming a free-falling dollar.

Hence the recent tweaks with the interest rates , to stop the dollar from falling .

[Ice]

Hence the recent tweaks with the interest rates , to stop the dollar from falling

Actually, cutting rates did the opposite. It made the dollar weaker because more money was pumped into the American economy.

[Xiahou]

Since the price of oil is mainly set by supply and demand and they regulate most of the the supply they do effectively set the price of oil

OPEC doesn't control most of the world's oil supply, but they do control a large chunk of it (somewhere around 40% iirc). When OPEC cuts or raises production, it can influence prices- but again, this is not the same as setting prices. Further, OPEC has periodic meetings where production quotas are discussed, this isn't done day-to-day to track fluctuating exchange rates and, while OPEC is supposed to act as one, members can and do break ranks and not follow agreed to quotas- further decreasing OPEC's price influencing power.

As to currency, a weak dollar has never been the officially acknowledged policy of the US (more walking the fine line), but based on the administration's actions, it's been something of an open secret that they've been pursuing one.

Oh and congratulations Canada! Now our lumber is even cheaper.

[Odin]

As to currency, a weak dollar has never been the officially acknowledged policy of the US (more walking the fine line), but based on the administration's actions, it's been something of an open secret that they've been pursuing one.

Your right, its standing shoulder to shoulder with that other little secret that the supplemental spending in Iraq and afghanistan are adding mamoth amounts to the budget deficit.

If I were Bush I would want a weak dollar too, what better way to lower the trade deficit, great little sound bite if you ask me. Of course they want a weak dollar because it does have the short term impact of making your exports cheaper, thereby lowering your trade deficits.

Nice cover for the budget deficit which Mr Bush is responsible for (well technically congress approved his supplementals so they all get a go at the troth).

[Tribesman]

Actually, cutting rates did the opposite.

Thats why I called it an attempt , it was one of two attempts recently

[Ice]

Thats why I called it an attempt , it was one of two attempts recently

I'm a bit confused by what you mean. The FED wasn't attempting to make the dollar stronger. On the contrary, they knew cutting rates would make the dollar weaker.

A good article by the BBC on the subject:

http://news.bbc.co.uk/1/hi/business/1231481.stm

The Federal Reserve, the US central bank, has decided to cut interest rates for a fourth time this year. BBC News Online's Steve Schifferes explains why the decision was taken and what effect it will have.

Why has the Federal Reserve cut rates again?

The US central bank has decided to act to reassure markets, businesses, and consumers about the economy.

After eight years of strong economic growth, the US economy began a sharp slowdown in the last few months of 2000, which has been reflected in a sell-off in the stock market.

Now, despite three interest rate cuts, company profits are under severe pressure, with growing evidence of corporate layoffs and a reduction in company investment, especially in the high-tech sector..

Business and consumer confidence is fragile, and there are fears that high debts could cripple future spending.

The hope is that lower interest rates will encourage businesses and consumers to spend more, and reduce the burden of debt.

What difference will it make to stock markets?

US stockmarkets have gone into a tailspin this year, with major indices down some 20% since January.

The US high-technology index, the Nasdaq, has fallen by more than 60% since its peak one year ago.

Investors fear that the US recession will reduce company profits, and that shares have been too expensive, especially high-tech companies.

An interest rate cut could help in two ways.

First, if it helps the economy to recover, it should help profits recover in the long term.

In the short-term, however, a fall in interest rates also makes shares more attractive as an investment compared to bonds, the other main financial investment.

Bonds pay a fixed rate of interest, so with lower interest rates they become more expensive.

But in recent weeks, stock markets have had a brief recovery, and the Fed intervention seems to be timed to encourage that trend.

What do lower interest rates mean for households?

In general, an interest rate cut makes it cheaper to borrow money - such as mortgages - but also reduces the income savers receive.

US households borrowed heavily during the economic boom, using their rising share prices as collateral.

However, unlike in the UK, most US households have fixed, not variable rate mortgages, and so they only receive a reduction from lower interest rates when they remortgage.

There are also many more shareholders in the US, whose wealth is directly linked to the rise and fall in share prices.

That may explain why the Fed believes that preventing too sharp a fall in the level of stocks is the key to restoring consumer confidence in the United States.

Does this mean further rate cuts ahead?

The US Fed is acting very aggressively by cutting rates four times in the past three months.

Even during the Asian financial crisis, the Fed only cut interest rates three times to try and stabilise the world financial system.

And although stock markets have fallen sharply, it is still unclear how deep and long-lasting the overall economic slowdown in the US will be.

And it is unclear whether interest rates cuts alone can restore the fortunes of the stock market, given the bad news on profits.

The Fed may need to act again in order to kick-start the economy.

Other central banks, like the Bank of England and the European Central Bank, are also expected to cut interest rates soon.

How quickly do interest rates work?

Because households and businesses only adjust their spending plans infrequently, a rate cut will not necessarily have an immediate effect on the economy.

Most economists believe that it could take 6 to 9 months before an interest rate cut changes spending patterns.

However, at least the advantage of interest rates is that they are implemented immediately.

The Bush administration also wants Congress to cut tax rates to help stimulate the economy.

However, the legislation may take until the end of the year before it becomes law - and people might not see the benefit in their tax returns until April 2002.

[Beirut]

Mmmmm... dollar at par.

Where's the credit card, baby?