Wednesday, July 25, 2007

Unfortunately, Loonie continues to surge


If I had a loonie for every headline in the past five months that delcared "Loonie hits 30 year record" I would have, um, thirty-five dollars, I think.

Canada.com: Loonie jumps on 'blowout'
News of a stunning surge in spending by Canadian consumers sent the loonie soaring more than one cent yesterday to a new three-decade high of more than 96.5 cents U.S. and set the stage for more interest rate increases.
The near three-per-cent jump in retail sales in May, reported by Statistics Canada, was almost six times the 0.5 per cent expected - and the steepest monthly gain in a decade.AC"While a good month was anticipated, this was a blowout," CIBC World Markets economist Avery Shenfeld said.


No, this is not good news:

But the good news on the economy was bad news for manufacturers, hammered by the high dollar.
It might spell bad news for borrowers, too, as the evidence of surprising economic strength added to expectations of more interest rate increases.
"This clearly puts additional Bank of Canada tightening in play, above and beyond a second quarter-point rate hike in September," BMO Capital Markets economist Douglas Porter said.


I've been saying this all along. A strong Canadian dollar has hugely negative repercussions for manufacturing industries in terms of percieved lower cost of goods to buyers abroad, not to mention all the companies that used to book nice easy profits on the USD/CAD conversion from foreign business branches.

I'm not saying that the sky is falling, but it's definetely a hassle in the short term.

Hat tip to Dealbreaker.com for beating me to this. I slept in today.

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