Loonie Reserve Currency?

[errolanderson]

Interesting development today . . .

There appears to be a pickup in global
central banks purchasing the Canadian
dollar as their so-called 'reserve'
currency. Spot loonie tested high of
$1.0166 U.S. today.

U.S. Congress shenanigans of late may be
fueling these purchases as the U.S.
financial house appears getting messier.

[cottonpicken]

God help us,the achilles heel of canadian farming.

Anybody want to do the math on how many more
bushels it will take to pay off debt.

[charliep]

Not sure on your last comment CP. A high valued loonie will mean relatively cheaper crop prices in the export market (other things equal). From a national debt standpoint, a higher valued loonie is a positive short for existing debt and financing new debt. Your comment might be the risk exists that Canada borrows with a high valued loonie and potentially could end up paying back with a lower valued loonie.

[cottonpicken]

What????

My debt is in canadian dollars,if my exported product
brings me fewer canadian dollars because we go
higher it takes more product to pay off debt.

?

Minus cost of production offsets-which never seem to
materialize.

[charliep]

Fair enough. What is the upside potential on the loonie? Relative to other risks (risk being both pain and gain), how much of a factor is a higher valued Canadian dollar versus other issues? As an example, the value of the loonie may increase relative to the US green back but other currencies in S.E./other developing countries may also increase creating more demand. Is the risk a higher valued Canadian dollar or the impact of volatility?

[errolanderson]

Haven't hedged the upside risk of the
loonie for feeders for more than a year
now. Today's move certainly got our
attention. Believe loonie gains may have
pressured canola at the close today.

This is the first time in a while that
there might be a possible risk to the
upside given the political bungling show
in the U.S.(IMO). But as Charlie
mentioned, we export to many countries.

Americans have already fallen off their
fiscal cliff regardless of what media
and politicians say (IMO). Global
central bankers must be notably uneasy
wanting to buy the Cdn dollar this
aggressively.

Big loonie swings might be the norm this
quarter.

[cottonpicken]

My fear is that when the sovereign defaults start to
happen and all these giant pools of capital start to fly
to safety the canadian dollar will soar faster than the
grains,but i don't think that will happen, i still believe
commodities will continue to be stronger than
currencies.