Alan2005

CAD has weakened partly because the central bank has recently set the expectation that interest rates are going to remain low for a long time.

Oink

It is about interest rates. So, if you're going to start being abusive, at least have some credible theory behind your remonstrations.

Editha

Now you are back to "it's about interest rates". Make up your mind!

Oink

It is about interest rates, they are the main determinate, if you doubt that then I suggest you have a look in any introductory textbook on macroeconomics.

merciacanuk

don't worry..Obama will stop propping up the USA economy soon and the US dollar and pound will go down.

Editha

I've just checked a couple. You are wrong.

Oink

So explain how exchange markets work and how banking, balance of payments and the money supply are linked?

Steve_

Not if the tax you're paying is less than the amount you're losing due to a strengthening US dollar, that's the snag.

Steve_

The purpose of interest rates is to control the supply of money and the usual arithmetic doesn't apply because the Fed is currently buying $75 billion of bonds every month. QE is at this moment a far more important factor than interest rates and like I said, this is pretty much uncharted territory so it's easy for CIBC to predict interest rates going up at the end of 2014, but what that means in the context of a draw down in QE in the US is very hard to say, it basically means "no clue" plus one cent.

MV=PT

Martin the cdn expat

Always nice to see people making friends, everywhere they go.



I agree that QE has put a huge fly in the ointment, making everything very difficult to predict.
I was hoping the dollar would get stronger, but it looks like that won't happen soon.
Canadian economic performance is usually 6 months behind the US, but these
days that may not mean much either.

spud1963

I note the comment from Steve, we moved to Canada 18 months ago but left a large chunk of our UK house sale monies in the UK i thought that when we move this money to Canada there would be no tax to pay as it was the sale of our main residence?

JamesM

With all due respect to yourself and Mr Oink. Interest rates are one of many factors involved in currency.

It has been known for rising interest rates to lead to a demand for the currency which drives up the value. The concept is known as "Hot Money".

I think Mr Carney has laid out guidelines for when interest rates are likely to rise and this has perhaps restored some faith in the GBP.

As we all know or need to learn there are obviously many other factors involved. Like any economic theory nothing is perfect and no economic theory has been proven to be completely accurate as it relies on the assumption that "all else remains the same".

None the less if you pull out your charts and look at the costs of goods I expect it to get back to the natural 2:1 ratio that I have always stood buy since the days of the lengthy debates we had on the exchange rate thread back in 2010. Several people challenged me with the ludicrous notion we were in for some "currency new world order" with the CDN dollar. All I will say is the charts don't lie.....2 to 1 by the end of 2014.

orly

Was about 2.20 back in summer 2007 if I recall correctly. The memories of when everything seemed cheap as a tourist lol...

Steve_

There will be capital gains tax based on the currency exchange from the point you became resident in Canada, because it's basically an investment to leave it in a foreign currency. So if it was worth X amount of Canadian dollars at the time you became a resident of Canada and it increases in value to X+Y when you exchange it to Canadian dollars, it then becomes subject to capital gains tax on Y.

Exchange rate issues are a real PITA living in Canada because so frequently you deal in USD. I know people who are paid in USD, have a USD account and a USD credit card and barely use Canadian dollars at all. Saves all the hassle with capital gains/losses.

But there are limits on doing it, the most obvious example being the dividend tax credit which Canadian residents receive on dividends from Canadian corporations. If the exchange rate is stable and the investments pay similar dividends then you'd be nuts to invest abroad, which is something a lot of people moving to Canada fail to realize because they're more used to investing in something to get a return when they sell it, whereas the Canadian investment market is more dividends orientated. And obviously Canadian equities are typically in Canadian dollars.

So you have a balancing act, the usual advice being everything in a tax-free or tax-deferred investment should be heavy on foreign investments (e.g. RRSP and TFSA) and if it's not, then invest in Canadian equities to get the tax credit.

Which is a very difficult thing to determine due to the exchange rate.

All I know is for the last few weeks I've been thinking about dumping a lot of Canadian stock and putting it into US stock and of course today I'm thinking, oh well, at least I haven't got to pay any capital gains tax because I didn't...

MarkG

Yeah, I remember the last big lump sum I transferred in 2007 was at about $2.15.

From what I've read lately, the Chinese are buying less resources because they're selling less crap to the rest of the world, so that can't be good for the Canadian economy. But sinking relative to an economic basket case like the UK still seems embarrassing.