[PAA-Discuss] Canadian Dollar Dominance

[Ron and Kris Graham]

<http://www.bloomberg.com/apps/news?pid=20601087&sid=a6uPcUFdLnao&refer=home
> Canada Dollar Dominance Shows Break With U.S. Economy, Markets 

 

By Haris Anwar

Sept. 17 (Bloomberg) -- Currency traders are concluding that there's nothing
the U.S. economy can do that Canada's can't do better. Much better. 

The U.S. and Canadian dollars, which traded in tandem 94 percent of the time
since 2000, decoupled in May and now have diverged for the longest stretch
this decade, according to data compiled by Bloomberg. 

While the worst housing slump in 16 years threatens to slow U.S. growth,
record oil prices and rising costs for copper and zinc are boosting Canada's
exports and allowing the government to balance its budget. Energy accounted
for 19 percent of Canada's exports this year, compared with 12 percent in
2002, government data shows. 

``Canada is in a very strong position,'' said John Taylor, chairman of New
York-based FX Concepts Inc., which manages $12.1 billion in currencies.
``Its economy has significantly diverged from the U.S., and it's got all
those things the world needs. My longer-term bias is that the Canadian
dollar would be stronger than the dollar.'' 

Canada's currency, nicknamed the loonie after the image of the national bird
on the one-dollar coin, has risen 3.7 percent against its U.S. counterpart
since June 12 amid growing speculation that losses related to U.S. subprime
mortgages would prompt the Federal Reserve to cut interest rates. 

Of the 16 most traded currencies, none has done better than the loonie this
year. It gained 13 percent, climbing to a 30-year high of 97.30 U.S. cents
on Sept. 14. The currency rebounded from a low of 61.80 cents in January
2002. 






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