Here is an excerpt from today’s Globe and Mail titled “Canadian
Dollar on run to $1.05 as Ben Bernake ‘hits the panic button’ “.
“The loonie is now
above $1.03 and expected to go higher still as the U.S. dollar weakens in
reponse to the Fed's latest moves.
As The Globe and
Mail's Kevin Carmichael reports, Fed chairman Ben Bernanke and his colleagues
took aggressive steps to bolster the recovery and deal with America's
unemployment crisis.
That included a
fresh bond-buying scheme - the latest round of quantitative easing, or QE3 -
and a pledge to hold the Fed's benchmark rate at an emergency low through to at
least mid-2015.
At the same time,
officials of the U.S. central bank cut their projections for economic growth
this year, though they took a more optimistic view of 2013.
The U.S. is
hobbled by unemployment, with more than 12 million Americans out of work.
Markets shot up
yesterday, and the rally continues today.
Senior currency
strategist Camilla Sutton of Bank of Nova Scotia believes the Canadian dollar
could reach $1.05 next week, and then bounce around in a range of $1.01 to
$1.05 over the next few weeks.
Of course that
"turns up the pressure" on Canada's exporters, who have already been
hurt by the strong currency.
Western Canada,
however, is enjoying a run-up in oil prices, while gold producers and investors
watch bullion continue to climb.
"Not only do
we have QE3, but we have the threat of QE4," Ms. Sutton jokes, referring
to Mr. Bernanke's promise to go even further if need be.”
“What happens when interest rates go up in Canada!!?”……
1.
Foreign investment increases as higher interest
rates attract foreign capital.2. Value of Cdn Dollar increases further as foreign money pours in.
3. Cdn exporters are hurt by increased dollar value.
However, Mike Moffatt explains in the video below that this
means Canada will likely RAISE interest rates sooner than
expected.
My question to Mike would be…..How can you assume that QE3
will have a much better effect than QE1 and QE2??
I don’t pretend to be an economics professor and I certainly
don’t know what the Fed is thinking, but I do know one thing…..No one can be
100% accurate in their prediction of the future.
Short term, the Canadian economy is still very fragile and
the US is in far worse shape. To me, raising
rates in Canada anytime soon seems unlikely….especially with the US “hitting
the panic button”.
Does anyone else have thoughts on this?
