ClareBC

I was just reading the other thread about the election and immigration - and I thought that what might happen to the exchange rate come January 23rd shouldn't be overlooked.

IMO

If the Liberals win (you never know...they might) then the exchange rate should stay about the same, on the basis that this is what we have had for a while.

If there is a Majority government (yes, even a Harper one, sigh..) then the Canadian dollar should be strengthened as all the financial wheeler dealers would like to have the security of a stable, strong government.

If there is a new minority government (eithe NDP, Bloc or ...) then the Canadian dollar will most probably be a bit weaker for a few months as the new ministers get up to speed.

any takers on this simplistic financial model??

Clare

CalgaryBlade

Unless any incoming government adversly affects the export of natural gas, oil, coal and uranium then the CAD should stay strong.

MarkG

Also, I'd imagine that interest rates will be rising again after the election, which will increase the value somewhat. However, the US dollar is probably going to sink once they stop raising rates, which will pull the Canadian dollar down with it.

So who knows where it will be a year from now...

andy_sheila

CAD should stay strong.
Define strong ?
yes, the CAD is stronger at the moment, stronger than usual but when the financial markets talk about "strong" currencies then it is the $US, GBP, Duetchmark, Franc, etc.
Whenever has the CAD been considered as a barometer of world economics?

Butch Cassidy

Sorry to pick a whole here but the Duetchmark and Franc you refer to no longer exist!!!!!!!!

andy_sheila

You are quite right and i stand corrected, i was referring to when there was a Franc and Deutchmark. When you are getting on in years, and away from Europe, you tend to forget

MarkG

Since about six months ago . I've seen several discussions on the Web in the last few months about whether to dump US dollars and pounds and buy Canadian dollars instead...

CWEMM02

Any election impact as already been priced into the currency. You have to appreciate that traders make bets each day based on future looking information. For example, three interest rate hikes are very likely in the first half of 2006 and have been priced in, though not at 100%, into the currency.

Someone mentioned that if the US stops raising rates then the US dollar will go down pulling the CAD down. This is not correct. Interest rate gaps are a very important driver of currency values. If the US does stop raising rates the Canadian rates will then catch up, decreasing the gap and allowing the CAD to rise.

There are so many things thatyou can consider when evaluating the currency. Trading currency is big business and everyone tries to be correct.

The bottom line, the CAD will continue to rise throughout the next 12 months due to continued strong commodity prices, higher interest rates, and continued strong exports. Expect a 5 to 10% rise in the CAD vs. the USD this year and gains on the pound.

In 2005 the CAD was the strongest performing G8 currency.

Don't worry about the election. Especially the person who suggested the NDP or Block could form a Minority governmet. The NDP will be lucky to get 25 seats and the Bloc only runs candidates in Quebec which means they can never have more than 75 seats. There are 308 seats in the house and the Conservatives will have very close to 155 of them.

CWEMM02

It would have been a good move. Especially if those funds were invested in Canadian equities. In CAD terms the TSX was the best performing place to be in 2005 returning more than 20%.

macadian

Sounds good to me!

As for the exchange rate...I cry into my beer every month without fail

dbd33

I think that very unlikely. I certainly wouldn't bet on it.

MarkG

It will continue to rise relative to the US dollar: but the only things holding the US dollar up right now (if dropping by about 20% against gold in a few months can be considered to be 'held up') are the expectation of more interest rate rises, and support from foreign central banks. The Chinese just started talking about shifting their reserves out of US dollars, which would not be good for the value of the dollar, nor would any sign that rate rises are coming to an end.

As far as I can see, the Canadian dollar value is tied strongly to the US dollar and the price of oil... if either goes up, the Canadian dollar generally goes up, and vice-versa. If the Chinese follow through and the Fed stop raising rates, I wouldn't be surprised if the pound is over $2 (and maybe $2.20 Canadian dollars) by the end of the year... particularly if the BoE finally get real and start raising rates here too.