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    "Loonie tumbles below 80 cents US'

    "Loonie tumbles below 80 cents US

    http://www.bnn.ca/news/4290.html

    John Partridge, The Globe and Mail
    October 22, 2008

    The U.S. dollar continued to flatten the loonie and every other significant currency except the Japanese yen early Wednesday, as hedge funds and other punters continued to unwind foreign investments and buy greenbacks as a prelude to repatriating the proceeds.

    As Asian and European equity markets continued tanking, the Canadian dollar plunged as far as 79.71 cents US, down 2.68 cents from Tuesday's official Bank of Canada close and 4.06 cents from Monday.

    This was also another in a series of recent three-year lows for the loonie, which just last November hit an all-time high of $1.10 US.

    "This market is an absolute freight train, and there's no standing in the way of it," said Steven Butler, director of foreign exchange trading at Scotia Capital Markets in Toronto. "Canada was one of the worst performers overnight."

    At 79.71 cents, it cost $1.2546 Cdn to buy $1 US compared with $1.1937 Cdn at Monday's close – and one British currency specialist said he thinks the greenback could strengthen to the point it is worth $1.30 within as little as a week.

    "Given that in the last three weeks we've gone from about $1.05 to $1.25, it may be just a matter of a week or so until we see it moving into that kind of area," Ian Stannard, a currency strategist at BNP Paribas in London, said in a telephone interview.

    The loonie's continued plunge was partly fuelled by the Bank of Canada's move yesterday to chop its benchmark interest rate by another quarter of a percentage point and strong signals it gave that more cuts are in store, making Canadian-dollar investments less attractive to currency buyers.

    As well, the prices of oil and gold and other commodities, key drivers of the loonie's surge in recent years, fell again Wednesday amid more signs of a global economic slowdown.

    But as has been the case for much of the past couple of weeks, the real story was more to do with U.S.-dollar strength rather than Canadian-dollar weakness.

    "U.S. investors had been heavily invested in overseas and emerging markets," Stannard said. "But we're now seeing financial market tensions picking up in central and eastern Europe, where liquidity issues are arising . . . and that's providing support for the U.S. dollar right now."

    During the global boom, there was plenty of "cheap U.S. liquidity," and that was used to fund positions in higher-risk, higher-yielding assets in emerging markets in Europe and elsewhere, he said.

    Now, however, as funds' appetite for risk has vapourized, the process is being reversed.

    "People are being forced out of these positions and have to buy U.S. dollars – that's why we're seeing such demand," he said.

    The euro, meanwhile, is under pressure because the problems in emerging central and eastern European markets "are right in its backyard."

    The European currency fell as far as $1.2743 overnight, its first break below $1.28 in nearly two years and down nearly 3.2 cents from Tuesday's close.

    Scotia Capital's Butler said that investors are also hoarding U.S. dollars.

    "Lending is loosening up, but they still want to make sure they have lots of dollar liquidity – for redemptions if they're mutual funds or hedge funds," he said.

    One small saving grace for the loonie, is that it has performed better against the greenback than the Australian dollar, another resources-driven currency.

    "Compared to the Aussie, we're not doing too badly," Butler said. "It's down about 20 percent in the last month and CAD is down about 17 percent," he said. "But, from the peak, the Aussie is down about 30 percent and CAD is down only about 20 percent."

    Julian Jessop, chief international economist at Capital Economics in London, cited several other reasons for the greenback's strength, and said each of them also is "consistent" with the yen's strength.

    "The most important is the growing recognition that, even though the U.S. may have led the way, the rest of the world is now heading for recession, too," he said in a note to clients Wednesday. Japan is in a better position, however, because it has avoided "imbalances" in household savings and government deficits that are plaguing Britain, for example. As a result, the Asian nation "should be among the first to recover as the global inflation shock fades," he said.

    Echoing other economists and currency strategists in recent weeks, Jessop also said the U.S. dollar has actually become a safe haven.

    "Even though the global crisis has been triggered by problems in the U.S. sub-prime mortgage market, U.S. policy-makers seem better able to deal with the economic fallout than their counterparts elsewhere," he said. "In particular, the [Federal Reserve Board's] dual mandate has allowed it to cut interest rates aggressively."

    As well, Jessop said, the collapse in commodity prices, which are usually denominated in U.S. dollars, is "feeding back into a stronger dollar, and vice versa."

    The net result of the greenback's strength is that he has revised a number of his key forecasts.

    He is now betting that the euro, for instance, will fall to $1.20 US from its current level by the middle of next year, rather than to $1.25 as he previously forecast. He has cut his target for Brent crude oil – currently about $67 a barrel – for the same period to just $50 a barrel from $70, and now sees gold at $550 an ounce rather than $700."

    Boy Charlie... I am glad I was not a betting man... on the loonie!

    I couldn't see how it wouldn't go to 1.20 OVER... not UNDER the US$!

    #2
    I'm the one who entertained the question of buying calls where the loonie was 90 cents. I sit back and ask my self if I would have ever in my wildest/most bearish dreams would have suggested $4/bu corn, $8/bu soybeans and $65/barrel oil. The answer would be no.

    Comment


      #3
      Charlie,

      At the CSCA Convention in July... we all laughed off oil @ $95/bbl and CDN$ at $.92

      The EDC economist was much more right and we were totally wrong!

      WOW... what a ride!

      Comment


        #4
        The present turmoil in the markets is the direct result of the Federal Reserve's policy of slowing the rate of monetary growth over the past year or so. This slowdown popped the real estate bubble in the U.S. along with a whole lot of investments that had been going along for the ride.

        However, monetary growth has surged dramatically in recent weeks and will continue to do so. It may take several months before commodity prices begin to rebound, although some analysts are saying this may happen before the end of the year.

        If you can hold on to your grain inventory long enough, you will be well-positioned to take advantage of rapidly rising prices as the inflationary effects of Fed policy takes hold again.

        Comment


          #5
          Bang on liberty.



          WHAT IS A BILLION?

          It's hard not to get depressed while reading this. It's time politicians
          themselves got a reality 'check' instead of always asking for our
          'cheque'!!

          What is a 'billion'?

          Now here's a reality check!

          This is too true to be very funny.

          The next time you hear a politician use the Word 'billion' in a casual
          manner, think about
          whether you want the 'politicians' spending YOUR tax money.

          A billion is a difficult number to comprehend, but one advertising agency
          did a good job of
          putting that figure into some perspective in one of its releases.

          A. A billion seconds ago it was 1959.

          B. A billion minutes ago Jesus was alive.

          C. A billion hours ago our ancestors were living in the Stone Age.

          D. A billion days ago no-one walked on the earth on two feet.

          E. A billion dollars ago was only 8 hours and 20 minutes, at the rate our
          government is spending it.

          While this thought is still fresh in our brain, let's take a look at New
          Orleans. It's amazing what you can learn with some simple division.
          Louisiana Senator, Mary Landrieu , was asking the Congress for $250
          BILLION to rebuild New Orleans . Interesting number, what does it mean?

          A. Well, if you are one of 484,674 residents of New Orleans (every man,
          woman, child), you each get $516,528.

          B. Or, if you have one of the 188,251 homes in New Orleans , your home
          gets $1,329,787.

          C. Or, if you are a family of four, your family gets $2,066,012.

          Washington , D.C , Ottawa, Canada.... HELLO!!! ... Are all your
          calculators broken??

          Tax his land,
          Tax his wage,
          Tax his bed in which he lays.

          Tax his tractor,
          Tax his mule,
          Teach him taxes is the rule.

          Tax his cow,
          Tax his goat,
          Tax his pants,
          Tax his coat.

          Tax his ties,
          Tax his shirts,
          Tax his work,
          Tax his dirt.

          Tax his tobacco,
          Tax his drink,
          Tax him if he tries to think.

          Tax his booze,
          Tax his beers,

          If he cries,
          Tax his tears.

          Tax his bills,
          Tax his gas,
          Tax his notes,
          Tax his cash.

          Tax him good and let him know
          That after taxes, he has no dough.

          If he hollers, Tax him more,
          Tax him until he's good and sore.

          Tax his coffin, Tax his grave,
          Tax the sod in which he lays.

          Put these words upon his tomb,
          'Taxes drove me to my doom!'

          And when he's gone, We won't relax,
          We'll still be after the inheritance TAX!!


          Accounts Receivable Tax
          Building Permit Tax
          CDL License Tax
          Cigarette Tax
          Corporate Income Tax
          Dog License Tax
          Federal Income Tax
          Federal Unemployment Tax (FUTA)
          Fishing License Tax
          Food License Tax
          Fuel Perm it Tax
          Gasoline Tax

          Hunting License Tax
          Inheritance Tax
          Inventory Tax
          IRS Interest Charges (tax on top of tax),
          IRS Penalties (tax on top of tax),
          Liquor Tax,
          Luxury Tax,
          Marriage License Tax,
          Medicare Tax,
          Property Tax,
          Real Estate Tax,
          Service charge taxes,
          Social Security Tax,
          Road Usage Tax (Truckers),
          Sales Taxes,
          Recreational Vehicle Tax,
          School Tax,
          State Income Tax,
          State Unemployment Tax (SUTA),
          Telephone Federal Excise Tax,
          Telephone Federal Universal Service Fee Tax,
          Telephone Federal, State and Local Surcharge Tax,
          Telephone Minimum Usage Surcharge Tax,
          Telephone Recurring and Non-recurring Charges Tax,
          Telephone State and Local Tax,
          Telephone Usage Charge Tax,
          Utility Tax,
          Vehicle License Registration Tax,
          Vehicle Sales Tax,
          Watercraft Registration Tax,
          Well Permit Tax,
          Workers Compensation Tax.


          STILL THINK THIS IS FUNNY?

          Not one of these taxes existed 100 years ago,
          And our nation was the most prosperous in the world.

          We had absolutely no national debt, had the largest middle class in the
          world, and Mom stayed home to raise the kids.

          What happened? Can you spell 'politicians!'

          And I still have to 'press
          1' for English.

          I hope this goes around THE
          USA and Canada at least 100 times

          What the heck happened?????

          Comment


            #6
            Should mention i did not write that piece.

            Comment


              #7
              Liberty, I would also agree you say it well.

              But we will be rewarded sooner than later.

              Comment


                #8
                Spooky

                http://market-ticker.org/archives/622-Fiscal-Cat-5-Hurricane-Warning.html

                Comment


                  #9
                  cottonpicken, this is beyond "Spooky" !!!
                  Thanks for the link, although I won't get much sleep tonight! The scenario playing out is very much the direction I've felt we've been heading for the last two years. I've been very cautious with spending and have accumulated a fair bit of cash and have increased my cash by selling vulnerable holdings. I guess I missed the 'news flash' about buying the Yen( I never expected the US$ to rise after the 800 bln bailout), now I think I'm only left with two choices, 1.) Short the US$ when it peaks or 2.) Buy something, (lots of things) intrinsic. I think the US gov't will print money in the hopes of buying time? what are your thoughts?

                  Comment


                    #10
                    Positive self reenforcing ideas are dangerous but?????

                    http://www.theglobeandmail.com/servlet/story/RTGAM.20081024.wdecloet1025/BNStory/SpecialEvents2/

                    minus the inflation b.s


                    Boarder-to the top.

                    Comment

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