$1 USD, that's like $1 CAD?

[Andrew]

Some of my American clients are wondering if their American dollars are good enough to pay me with or if they need to pay more. Another sign of the USD weakening.

I'll have to take into consideration next year about what currency I get paid in. It used to be Americans paid in USD which is fine because it turned into lots of CAD, but now the USD will turn into less CAD.

[Andrew]

The US Federal reserve cut the interest rate AGAIN. This time it was only .25% (25 basis points).

And once again the Canadian currency went way up (along with every other currency I presume). It reached $1.06 at one point but is back around $1.055.

Wow Google is now over $700?!!

[Khan]

The GBP is $2.08 dollars... Happy days.

[Andrew]

So does this mean a lot of British people would be taking vacations in the USA or the Caribbean?

I think when my friends were in the Caribbean (Cuba, Dominican Republic, Mexico etc), there were a lot of British people along with other Canadians.

EDIT:

The 1.06 record set last night was the highest in 50 years (when currency was set to floating and not fixed). The highest before that was 1864. link

[Khan]

Yes my family is planning on going to the US, maybe in the easter, the flights are quite cheap as well so it can work out as cheap as some European destinations.

[Tatar Khan]

Andrew as for your clients you should have hedged against foreign exchange movement. Or made contracts in Canadian dollars or certain exchange rate, in all cases there is a risk that you will lose due to adverse market movement.

A lot of Canadians are going to US now because the country is like on 40% off sale for them right now, I imagine that the same thing is for other people. Hopefully this increased business activities will stabilize the US dollar.

[Andrew]

Yes I plan on making sure about that next year. Already have received 98% of revenue from USA so I'm not too worried right now.

A lot of Canadians are going to US now because the country is like on 40% off sale for them right now, I imagine that the same thing is for other people. Hopefully this increased business activities will stabilize the US dollar.

That can be a reason why the stock market is doing good in the USA. Foreign investors are buying up stock now because it is 30% cheaper currency conversion than it was 5 years ago. And if the USD gains in a couple years, it will make their investments worth even more when they cash out (convert back to their own currency).

[Andrew]

$1.07 right now.

firefox crashed while I was typing this up. hmm. (I updated today to newest version).

[Andrew]

$1.08 today.

Man the USD has gone in the crapper.

The Canadian dollar topped $1.08 US early Tuesday.

The euro also reached another record high against the U.S. dollar amid expectations of more interest rate cuts in the United States.

More interest rate cuts!? So they are trying to avoid a recession by decreasing interest so people don't default on their home loans at the cost of increasing inflation by a large amount which makes their money worth less. Sounds like a great plan!

They should keep interest rates the same, let the people who got loans who couldn't afford them default, and let the companies who lent out money to people who couldn't afford it go bankrupt. Sounds like they are encouraging bad practices by consumers and businesses by entering in agreements they cannot keep. Spend spend spend! Wait they have to pay it back sometime? oh noes! bail them out! Try to avert a recession by making it happen at a later date and make the upcoming recession worse than if they had it now.

With the price of Oil reaching $100 a barrel in a couple weeks, it sure will be fun seeing if the US will continue their spending habits.

You can expect foreigners (companies/personal) buying up lots of capital in the US because it is very cheap to do so now. So once this recession is over, the rest of the world will own a much larger portion of American companies. And the profits these corporations make will be sent out to other countries where the investors live.

So with high Canadian dollar it is 75% higher than it was 5 years ago vs USD. Either the US gets a better economy which will appreciate its currency, or Bank of Canada could decrease the interest rate to decrease our exchange rate, but this will mean an increase in the money supply which leads to higher inflation. Bank of Canada has inflation targets, so they will do whatever it takes to keep inflation between 1-3% (target is 2%, but it is currently approaching 3% because of hot economy). So it is unlikely that they will decrease the interest rate, unless our economy slows down some. But there is no sign of that yet.

EDIT:

It broke 1.09!!!

EDIT:

Wall Street Is Pressing Fed For More Rate Cuts

Whaa??

The reason: fresh concerns about a growing credit crunch pushing the U.S. economy into a recession.

I've seen this coming for several years. Too bad that the industry did nothing about it. For the past several years there have been lots of articles about increasing bankruptcy, defaults on loans, and houses not selling. If they decrease the interest rate again and again, you can expect high inflation.

EDIT:

Sinking Currency, Sinking Country

A good article explaining the reason for the currency decline. Basically it is consumer whores. spend spend spend. Although the biggest flaw with the article is that the writer does not blame Bush for it.

[Andrew]

$1.10 today.

That is a huge psychological barrier to pass.

Although our dollar should have been higher before. Canada has had 11 consecutive budget surpluses and I'm pretty sure our trade is doing good (no big trade deficit).

Oil is at $97, the British pound at $2.10 (wow, must have a good economy or something).

I can't wait for the US federal reserve to decrease interest rates again. That will put the nail in the coffin for the USD.

Bank of Canada dates:

22 November 2007:  Bank of Canada Review

4 December 2007: Interest Rate Annoucement

[Timenn]

You know, in Dutch we have such a nice word for a tourist attracted by disaster. I think the word would fit you nicely ;).

It may take a little while before prices get adjusted to the new rate in Canada. I know this is still in change in Europe, and the euro has been worth more than the USD for years now. The thing that makes American import cheaper is that a euro to us is generally the same as a USD is to an American. Just like the pound to a Briton is the same as a euro to an average "Continental".

[Egeides]

Important move: Seeing this, China is reacting and will diversify its currency reserves:

``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' . . . The dollar is ``losing its status as the world currency,''

(Bloomberg)

They told that it didn't mean they'd get into buying Euros. They're going to buy $CAN ;D

[Egeides]

AND: Sarkozy warns that "If we are not careful, monetary disarray could morph into economic war. We would all be its victims."

http://www.bloomberg.com/apps/news?pid=20601083&sid=aZUhDckICL7w&refer=currency

It gives the pulse... Any views on how potential trade wars would go (and effects)?

[Khan]

Petrol in the UK hit

[Andrew]

Yah I read that several countries might get rid of the USD and change to a different currency.

China has over a trillion USD and it lost a lot of that value because of the USD deflating.

Gas prices in Canada right now are still normal, around $1 CAD per litre. It's been around $1 for several years.

EDIT:

I don't think any country will use CAD as their currency, better off with Euro.

EDIT:

CAD is back to $1.08.

[Khan]

GBP is now $2.11. Beaureau de Changes are starting to actually give an exchange rate of  2:1 (2.02 is the best I've seen so far) and petrol prices are all tending towards

[Andrew]

Yah, our gas prices went up 4 cents unscheduled (we have regulations that govern fuel prices). But luckily the CAD is worth a lot more than USD otherwise we would be paying a lot more for gas (it would probably be another 5 cents higher).

Canadas trade surplus has fallen because of the high dollar, this has decreased the dollars worth. Back to 1.06-1.07.

Canadians are truly flocking like crazy to the US to buy stuff. I live 5-6 hours from the border and people are planning on making shopping trips. Although to me that is stupid spending 12 hours and $200 to go shop just to save 20% on items such as electronics. You'd be better off working those 12 hours making $300 (2 people) and saving $200 by not going. I think it is mostly a novelty. If Canadian retailers don't drop their prices to match the US price, they simply wont sell any product. Which is worse than selling them at a loss.

[Khan]

It seems the dollar is starting to stabilise again, 2.04 GBP and 0.96 CAD. Maybe that cheap holiday will have to be delayed once again.

[Andrew]

Yah CAD is back down to 1.01. Hopefully it stays near parity so currency conversion isn't difficult to do. And prices for goods become similar in Canada and the US.

[Andrew]

So the CAD has been at par with USD last week or so. And today Bank of Canada decreased interest rates by 0.25%

So this means that the value of the CAD has decreased and is currently slightly lower than par.

First time in 3.5 years that they decreased the interest rates. I'm guessing most people were expecting this, and is why the CAD was at par for the past week.

[Khan]

[Andrew]

CAD is still around $1.

Inflation in the US is at its worst one month increase in 34 years. They are even saying that stagflation is possible.

Inflation up by 4.1 percent in 2007, the largest increase in 17 years.

And yes back in September/October 2007 I called it!

And you can bet that the US fed will decrease interest rates again in 2 weeks. Which will cause more inflation.

2008 the year of a recession? If only I had lots of money to dump into the stock market when prices are so low (especially for a Canadian with parity dollar).

EDIT:

Inflation Rate Is Worst in 17 Years - another article.

[Andrew]

Ha, world markets today went down 5% (at one point 6% on TSX). US market was closed, but futures were open over the weekend and they dropped as well.

As one person who was invested in the futures lost $40,000 this weekend in this youtube video. His blog. video contains the F word. Oh the humanity and panic he is going through.

Expect a big selloff tomorrow. Canada interest rates are being set tomorrow as well. They say it could go down 0.25% to an even 4%.

Bush announced a couple days ago he put together a package to save the markets. I don't think spending their way out of it will work. Because that is what they have done for the past decade. And it was proven during the 1990 recession in Ontario that spending your way out of a recession does not work. It only increases government debt.

[Andrew]

Fed Cuts Rates by 3/4 Point In Bid to Calm Markets

Wow. That is huge news.

Meanwhile The Bank of Canada decreased the interest rate by 0.25%.

Tokyo falls 6%, Hong Kong 9%: Asian markets subjected to intense sell-off; trading briefly halted in Mumbai

Today is going to be fun to watch the business news channels.

Wall street opens in 10 minutes!

Off to watch business news on tv.

[Egeides]

Free money... I've seen this somewhere, can't remember where. Oh yeah, Rome Total War!! Nope, that's not it... ;D

Andrew, do you also know an economic theory which fits with what you think is going on?