Canada dlr to hit parity with USD by end '07-CIBC

[TrogL]

Source: Reuters

The Canadian dollar will reach parity with the U.S. currency by the end of 2007 with the help of high commodity prices, ongoing merger-related interest and higher interest rates, CIBC World Markets said on Friday.

CIBC said the Canadian dollar, which was last at par with the U.S. dollar in November 1976, will maintain parity with the greenback into at least the first quarter of 2008.

"Between red-hot commodity and energy markets and huge capital inflows associated with an avalanche of M&A deals, the Canadian currency has plenty of octane left to take a concerted run toward parity against the greenback," CIBC World Markets chief economist Jeff Rubin, said in a statement.

...

According to Rubin, the Canadian dollar will also benefit from expectations for the U.S. Federal Reserve to cut its key lending rate in the fourth quarter of 2007.

Read more: http://today.reuters.com/misc/PrinterFriendlyPopup.aspx?type=bondsNews&storyID=2007-06-01T124535Z_01_N01297629_RTRIDST_0_CANADA-DOLLAR-CIBC.XML

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I remember when the loonie was above parity. I was living in Niagara Falls, Ontario at the time and when we went across the river businesses would claim a parity exchange rate. Odd, when the loonie started to sink, they never returned the favour.

[rockymountaindem]

1. According to all the economics profs I had at the Univeristy of Toronto, that's not good for Canada

Fortunately for me I just graduated from there, because the rising loonie coupled with the additional sales taxes were really driving up my cost of living (as a college kid) compared to the US.

[DavidDvorkin]

2. It's certainly not good for me!

I love BC, but it keeps getting harder to pay for trips there. Years ago, the low Canadian dollar made our vacations in Vancouver/Victoria delightful. Last year, I found myself worrying constantly about my bank balance.

(And really, it's all about me.)

[rockymountaindem]

3. When I went to U of T four years ago

I could basically deduct 30% off the price of everything. By my senior year this year, it was probably more expensive for me to be there than here. Oh well, at least I got two good years of, "hey! this is practically free coffee!" living.

[IntravenousDemilo]

4. Me either.

I haven't even received my Jeopardy! winnings yet, and since late March, when my shows aired and the Canadian dollar was at $0.86 US, I've lost about $7,000.

It would be nice if US-produced books, CDs, and other merchandise, which show two separate prices for our two countries (considerably higher in Canada), will even out in cost. The higher price was based on the exchange rate when our dollar was at 62 cents. Not holding my breath, though...

I guess I'll be doing a bit of border-hopping to buy stuff.

[roamer65]

5. I expect the loonie to go well beyond parity.

We have deficits as far as the eye can see here in the US. Canada's budget situation and economic fundamentals are far better than ours.
The Bank of Canada simply has to allow the loonie to rise, or else our inflation will migrate across the border. Kuwait had to break its dollar-dinar peg, because maintaining it would have required them to grow their money supply by 19% a year. Very inflationary.

The Bank of Canada has had to give up supporting the USD, Kuwait has had to do so...next ones that will are Hong Kong and China.