The loonie gaining on the greenback

[Queen of the Beach]

At the close of trading, Friday Nov. 5th, the loonie was worth 83.50 cents US, up a little more than two-thirds of a U.S. cent from Thursday's close. Our dollar was further strenghtened by the 'good news' report on jobs in both Canada and the US. The greenback has now moved below the $1.20 CDN level.

Since Bush has been re-elected for four more years and there is the belief that the Bush administration is not overly concerned by a low dollar because it makes US goods cheaper abroad, I think the loonie will continue to rise. What are your thoughts on the rising Loonie? Is it a good thing or a bad thing for Canadians? How much more do you think it will rise? :confused:

[RidetoGolf]

The rising C$ is bad for Canadian in the short term because it's going to hurt the export somehow. The higher C$ will hurt in the short term because Canadian have been protected by the low C$ in the past, and when the C$ goes up, the protection is no longer there and therefore Canadian firm will be less competitive than firms from other countries. Interestingly, given the recent surge in C$, the trade numbers still look pretty good. But if C$ continues to rise, Canadain firms need to find a way to stay competitive from other sources. This will force Canadian firm to innovate, develop new technology to become more cost efficient. As such, in the long run, Canadian firms will be more competitive due to higher C$.

That's just one way to look at this...

[Ego Woods]

At the close of trading, Friday Nov. 5th, the loonie was worth 83.50 cents US, up a little more than two-thirds of a U.S. cent from Thursday's close. Our dollar was further strenghtened by the 'good news' report on jobs in both Canada and the US. The greenback has now moved below the $1.20 CDN level.

Since Bush has been re-elected for four more years and there is the belief that the Bush administration is not overly concerned by a low dollar because it makes US goods cheaper abroad, I think the loonie will continue to rise. What are your thoughts on the rising Loonie? Is it a good thing or a bad thing for Canadians? How much more do you think it will rise? :confused:
Depends on the Canadian......exporters, importers or consumers.....all have varying effects.....it's good for the avg Canadian consumer as well as Cdn companies which import from the US to Canada......however, it is not good for the exporters, many of which rely on the US for major resources from Canada.....particularly wheat, forestry and fishing...we have already seen a stark example of what happens when US cuts their imports from Canada....and that is from the cattle industry due to the 1-2 mad cows discovered from Canada....the industry has been devastated.....i'm not too sure if R&D would save a particular industry like the cattle industry in the long run.

It is also not good for Canadian retailers who would lose much of their sales by consumers who choose to buy from the US instead.....

[RidetoGolf]

i'm not too sure if R&D would save a particular industry like the cattle industry in the long run.
Canadian is not at all competitive in the dairy product industry. CAD gov't has been putting a lot of money to subsidize the dairy product industry. And that's what pi$$ing the U.S. the most, IMO. Why does it cost more for Canadian to product a Litre of milk as compared to the U.S.? The answer is efficiency. And R&D will definitly increase the efficiency in the dairy product industry. The amount of $ spent by Canadian on R&D is no where in the top 50 (if i remembered correctly). R&D is a must for the success of the long term growth for a country. Look at Taiwan and China now.

[Mok]

Canadian is not at all competitive in the dairy product industry. CAD gov't has been putting a lot of money to subsidize the dairy product industry. And that's what pi$$ing the U.S. the most, IMO. Why does it cost more for Canadian to product a Litre of milk as compared to the U.S.? The answer is efficiency. And R&D will definitly increase the efficiency in the dairy product industry. The amount of $ spent by Canadian on R&D is no where in the top 50 (if i remembered correctly). R&D is a must for the success of the long term growth for a country. Look at Taiwan and China now.
RidetoGolf, i think Ego was referring to meat exports when he was referring to "cattle industry"...

[Ego Woods]

Canadian is not at all competitive in the dairy product industry. CAD gov't has been putting a lot of money to subsidize the dairy product industry. And that's what pi$$ing the U.S. the most, IMO.
You say that the US gov't is PO'd at the Cdn gov't for supporting their own cattle industry? I don't get it, why would the US get upset at that?

Why does it cost more for Canadian to product a Litre of milk as compared to the U.S.? The answer is efficiency. And R&D will definitly increase the efficiency in the dairy product industry. The amount of $ spent by Canadian on R&D is no where in the top 50 (if i remembered correctly). R&D is a must for the success of the long term growth for a country. Look at Taiwan and China now.
If we're talking about efficiency, I think it's more of an economies of scale than it is an R&D thing....Cdn's have to be more competitively priced and in order to do that, there must be some attrition with the smaller exporters joining the more larger ones, thus trimming down fixed costs and offering a more competitive price......I can see this happening in the long run, if the $CDN continues to be at such a high rate, moreso than R&D......but in the end, Canadians are just being more competitive, when a deflating CDN dollar can solve this problem...so we will be hurt for a period of time, until the market corrects itself......

[RidetoGolf]

I agree with you that consolidation is a way to go in the long run.

You say that the US gov't is PO'd at the Cdn gov't for supporting their own cattle industry? I don't get it, why would the US get upset at that?
Let's say it costs Canadian $10US to produce one cow, whereas it only costs American $7US. US ranchers are selling their cow for $8US in the states. In order for Cdn to sell their cows in the states at a competitive price ($8US), Cdn gov't has to sub Cdn ranchers $2US for every cow they sell. This will increase competitions in the states and will hurt U.S. ranchers. I am not sure about the fine print in the NAFTA between US and CAD, but I am pretty sure US will not be happy if the Cdn are dumping their products to the states at a price lower than their costs.

[Ego Woods]

Let's say it costs Canadian $10US to produce one cow, whereas it only costs American $7US. US ranchers are selling their cow for $8US in the states. In order for Cdn to sell their cows in the states at a competitive price ($8US), Cdn gov't has to sub Cdn ranchers $2US for every cow they sell. This will increase competitions in the states and will hurt U.S. ranchers. I am not sure about the fine print in the NAFTA between US and CAD, but I am pretty sure US will not be happy if the Cdn are dumping their products to the states at a price lower than their costs.
I believe this isn't the case that's happening right now with the cattle industry.....the gov't has been subsidizing cattle farmers due to the US banning Canada's cattle because of the 1-2 cases of mad cow. It's been estimated that Canadian farmers have lost $2-2.5 billion, but the gov't subsidy to them is nowhere near that. Some believe that the real reason the US banned them was because we did not support them in the Iraq war, but this is only a rumour along with many other rumours.

Even if it were the case that you stated in your previous post, the US can easily subsidize any part of their exports they send to Canada, and there would be no way that we could compete with them......

[RidetoGolf]

Here is a good article to support my point. :)

http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1101424211394&call_pageid=968350072197&col=969048863851

[Ems]

yup, there's definitely winners and losers when the loonie goes up. I'll think positive and hope it stays up for all my planned vacations to the US and to HK (which is locked to the US$)

[Mok]

yup, there's definitely winners and losers when the loonie goes up. I'll think positive and hope it stays up for all my planned vacations to the US and to HK (which is locked to the US$)
why don't you just buy some USD now if you are worried it'll become expensive?

[Ems]

because it may continue to move up, rather not speculate