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Why has the exchange rate gone up so much lately.

Why has the exchange rate gone up so much lately.

Old Dec 29th 2013, 7:45 pm
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Default Why has the exchange rate gone up so much lately.

So today it is sitting at about 1.73 good news for sure.

Is this a blip or a sign of a UK recovery, I thought this time of year it always dipped due to the demand for oil.

Are there predictions for better times ahead or will it be short lived.

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Old Dec 29th 2013, 8:18 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Lamin
So today it is sitting at about 1.73 good news for sure.

Is this a blip or a sign of a UK recovery, I thought this time of year it always dipped due to the demand for oil.

Are there predictions for better times ahead or will it be short lived.

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A sign of UK recovery.

I expect the pound to continue to strengthen it was far too low against the Canadian dollar versus historic averages.
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Old Dec 29th 2013, 9:11 pm
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Default Re: Why has the exchange rate gone up so much lately.

Its about interest rates. When they go up there is more demand for that currency.
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Old Dec 30th 2013, 12:03 am
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Default Re: Why has the exchange rate gone up so much lately.

The main reason why is because there are signs of recovery. I think people forget that the Canadian dollar has been at historic highs against Sterling and the USD. Can't carry on forever. The US is also easing off on QE which will lead to it being stronger.

The real question is whether to dump Canadian equities and go into US equities... which is a tricky one because of the dividend tax credit in Canada (which is supposedly about avoiding dual taxation but is really about propping up the Canadian equity market). Also you're assuming if you do that the Fed isn't going to screw up with the end of QE which could cause US equities to go down the toilet. But even if that were to happen, if the US dollar is still going up it's not quite as bad as it sounds.

Also everyone thinks the Bank of Canada will jack up interest rates towards the end of 2014 which will obviously boost the Canadian dollar, but personally I think it's extremely hard to predict because backing off on QE could have any number of results: http://www.marketwatch.com/story/glo...ast-2013-12-11
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Old Dec 30th 2013, 12:35 am
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Steve_
Also everyone thinks the Bank of Canada will jack up interest rates towards the end of 2014 which will obviously boost the Canadian dollar, but personally I think it's extremely hard to predict ...
Its not hard to predict really. Too much debt so nobody can afford high rates. They are going to be low for years, possibly for the rest of this decade.
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Old Dec 30th 2013, 2:39 am
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Default Re: Why has the exchange rate gone up so much lately.

So do you think it's gone past it's low and it's either going to increase or stay around the 1.7 mark then?
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Old Dec 30th 2013, 5:35 pm
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Default Re: Why has the exchange rate gone up so much lately.

The GBP is predicted to continue to strengthen this year:

http://www.telegraph.co.uk/finance/c...Citigroup.html

http://www.poundsterlingforecast.com/
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Old Dec 30th 2013, 5:48 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Oink
Its about interest rates. When they go up there is more demand for that currency.
Seeing as UK interest rates haven't risen since 2007ish, that doesn't really work...

My guess for a BoE base rate rise is 2015.

Target is for UK unemployment to drop below 7% first.

UK economic growth forecasts are driving the exchange rates off their HISTORIC LOW...

Last edited by withabix; Dec 30th 2013 at 6:04 pm.
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Old Dec 30th 2013, 7:31 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Alan2005
Its not hard to predict really. Too much debt so nobody can afford high rates. They are going to be low for years, possibly for the rest of this decade.
Well that would be a reason to raise them, too much consumer debt and also the Bank of Canada is worried about the real estate market.

I think CIBC is right on that one, but no-one can really say what effect the Fed easing off on QE will have. It's never happened before so I agree with CIBC that the interest rates going up will add, say, a US penny to the value of the Canadian dollar but what the exchange rate with the USD will be is hard to say. It could be 80 cents and then add on a cent or it could be 93 cents and add on a cent (as CIBC predict).
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Old Dec 30th 2013, 7:36 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Lamin
So do you think it's gone past it's low and it's either going to increase or stay around the 1.7 mark then?
1.7 historically is still low.

Bear in mind there is no "return to norm" for exchange rates, there isn't a "normal" rate and they can shift all over the place. However like I said 1.7 is pretty low and most people would bet on the UK economy getting stronger and then finally the interest rates may actually go up. How long that will take is hard to predict.

So yes at some point it will be much higher than 1.7

But "when" exactly...

All I can say is, I've said on here repeatedly over the last few years that moving to Canada if you're bringing a lot of money with you is bonkers because the Canadian dollar is only going to fall in value, so if you convert everything you will lose money (or... you keep the money and then face capital gains tax when you finally use it in Canada).

I remember back in 2003 it was $2.50 to £1.
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Old Dec 31st 2013, 12:34 am
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Steve_
The main reason why is because there are signs of recovery. I think people forget that the Canadian dollar has been at historic highs against Sterling and the USD. Can't carry on forever. The US is also easing off on QE which will lead to it being stronger.

The real question is whether to dump Canadian equities and go into US equities... which is a tricky one because of the dividend tax credit in Canada (which is supposedly about avoiding dual taxation but is really about propping up the Canadian equity market). Also you're assuming if you do that the Fed isn't going to screw up with the end of QE which could cause US equities to go down the toilet. But even if that were to happen, if the US dollar is still going up it's not quite as bad as it sounds.

Also everyone thinks the Bank of Canada will jack up interest rates towards the end of 2014 which will obviously boost the Canadian dollar, but personally I think it's extremely hard to predict because backing off on QE could have any number of results: http://www.marketwatch.com/story/glo...ast-2013-12-11

Have to keep those Canadian equities. No point in Paying marginal rate tax on US divided (assuming unregistered account) when you can pay almost nil tax on Canadian Divis.

RRSP best place for the US portion of the portfolio but that's another topic altogether.

I have mixed feelings about the GBP given my current situation but on the main I'm glad I didn't move all my money here last year as I would be having to move some back now.

That would be quite the loss on a round trip conversion.
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Old Dec 31st 2013, 5:11 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by withabix
Seeing as UK interest rates haven't risen since 2007ish, that doesn't really work...

My guess for a BoE base rate rise is 2015.

Target is for UK unemployment to drop below 7% first.

UK economic growth forecasts are driving the exchange rates off their HISTORIC LOW...
Why are you shouting? Its maybe that interest rates have dropped further in other economies. While there may be other factors involved in determining exchange rates, such as debt, inflation and economic performance, interest rates and exchange rates are most highly correlated.
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Old Dec 31st 2013, 5:21 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Oink
Why are you shouting? Its maybe that interest rates have dropped further in other economies. While there may be other factors involved in determining exchange rates, such as debt, inflation and economic performance, interest rates and exchange rates are most highly correlated.
Current interest rates:
Canada 1%
UK 0.5%
So, if interest rates are the paramount factor, the CAD should have strengthened against the GBP. But it hasn't.
USA interest rate currently 0.4%, but the CAD has been weakening against the USD for the past year.
I'm tempted to use caps too. If someone is deaf you have to shout.
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Old Dec 31st 2013, 5:33 pm
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Default Re: Why has the exchange rate gone up so much lately.

Originally Posted by Editha
Current interest rates:
Canada 1%
UK 0.5%
So, if interest rates are the paramount factor, the CAD should have strengthened against the GBP. But it hasn't.
USA interest rate currently 0.4%, but the CAD has been weakening against the USD for the past year.
I'm tempted to use caps too. If someone is deaf you have to shout.
Its not as simple as just that, its connected to the money supply chain, to tacit agreements between central banks, which will in the end be about interest rates. As a member of the general public you will not know which way it will go without guessing, otherwise you'd all be speculating in the currency markets. If you're going to shout, at least know what you're talking about.
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Old Dec 31st 2013, 5:42 pm
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Default Re: Why has the exchange rate gone up so much lately.

What YOU said was that it was "about interest rates". I and others have pointed out that you are wrong. So you've adopted our arguments and now you are changing your tune. If you are going to open your mouth it is a good idea to know what you are talking about.
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