Are You Bullish On (Loonie)Canadian Dollar
Well loonie is climbing high and it is moving closer to parity with a high against the U.S. dollar not seen since July 2008. The loonie was recently trading higher with one U.S. dollar buying C$1.0106. While this isn’t surprising many of the people as most expect the currency to remain above for years.There are various reasons working behind it.We can call as the signs of an economic recovery across Canada which includes including improving real estate prices, GDP growth and job creation numbers, the province faces several challenges for its key industries, especially with the dollar nearing parity with the U.S. greenback.
While some strategiests are thinking that the story of canadian dollar will move more further as according to Royal Bank currency strategist David Watt “We’ve taken to calling parity the new normal for the Canadian dollar,”
he believes loonie will keep its trend on a consistent basis.
The Achilles heel of the Canadian economy jumped a surprising 1.4 per cent in the last three months of 2009, the biggest increase in a dozen years.
TD Bank’s deputy chief economist, Craig Alexander stats that
“The reality is the domestic side of the Canadian economy is much stronger, (and) the Canadian financial system is operating normally, whereas the U.S. system isn’t,” he explains.
“The strong Canadian dollar is here to stay.”
While here are some not called good effects of this rise :
With every one-cent annualized increase in the Canadian dollar costing the government about $215 million in lost revenue, at a time that it’s forecasting a record $4.7-billion deficit.
It is now becoming a majro problem for agriculture side as Canadian dollar hovering around par with the greenback is making life all the more difficult for Alberta agriculture and energy producers who export their products. The ongoing drought is basically the main problem.According to Liberal Leader David Swann The high dollar is a sign of a strong Canadian economy, Swann said, but acts as “a double-edged sword” to agriculture producers.