Rising Canadian Dollar: Blessing or Hazard

Toronto 29th 2007: The expatriate community from South Asia is feeling pleasure to see Canadian dollar rise against the US dollar but it is not a lucrative trend for the Canadian businessmen at home. Central banks from Bogotį to Mumbai are imposing foreignexchange curbs to take control of their soaring currencies from traders dumping the US dollar.

The higher Canadian dollar exchange rates to expatriate community for their country of origin would mean more cash to the left behind families. At the same time continuing jobs in Canadian industry would also be at risk due to higher Canadian dollar value.

The rising Canadian dollar is costing tens of thousands of good manufacturing jobs and if it remains at or near parity with the U.S. dollar it could cost Canada another hundred thousand of jobs in the coming years.

Would immediate action by the federal government and the Bank of Canada to reduce the high value of the Canadian dollar ease the growing pressure on the manufacturing sector?

It seems Canadian Finance Minister is sensitive enough to hear the alarm bell and stress that "My concerns are lessened by another cent or two but we're still mindful of the rapidity of the depreciation of the U.S. dollar visą- vis the Canadian dollar, and the volatility that was shown in recent times in terms of the two currencies". His concern over the strong Canadian dollar is lessening as the currency continues to fall from peak levels earlier this month.

The Canadian Finance Minister Jim Flaherty said he was closely watching the currency's value and specifically mentioned the Bank of Canada's announcement on interest rates next week as a key event before the meeting.

Finance Minister Jim Flaherty said on Wednesday Nov. 12th that he will discuss the lofty Canadian dollar in a meeting set for December 12th with provincial finance ministers. Flaherty said he was certain his provincial counterparts would want to discuss the strong Canadian dollar, which has made exports to the United States more expensive and aggravated job losses in the manufacturing sector.

Flaherty said his priority for talks with provincial finance ministers is the creation of a common securities regulator in Canada and knocking down inter-provincial barriers to trade.

"I imagine we will talk about the state of the economy, we have a very strong economy. We have some areas of weakness of course.

They want to talk about other issues as well. I am sure they will want to talk about the dollar" Flaherty told reporters.

Jim Flaherty said "We are only finance ministers but we will talk about these issues and there will be some things to happen between now and then" he said.

"I think December 4th is the next rate-setting date for the Bank of Canada and we are watching, of course, the dollar and how it's trading as a market currency". The minister's concern over the currency appeared to be lessening in line with it's depreciation from the peak it hit earlier this month.

Flaherty also said he is not inclined to take any immediate measures to aid manufacturers, despite growing pressure from opposition parties to do so before the next budget in the spring of 2008.

Meanwhile, The Canadian dollar weakened against the U.S. dollar on Tuesday amid risk aversion in the market and as oil prices softened. At 8:02 a.m. EST, the Canadian dollar was at US$1.0065, valuing each U.S. dollar at 99.35 Canadian cents, down from Monday's close of US$1.0088, or 99.12 Canadian cents to the U.S. dollar.

Loonie opened at 100.22 cents US on Wednesday, down almost three tenths of a cent from Tuesday's close. On Tuesday afternoon, the Canadian dollar traded just under 1 dollar US for the first time in weeks - trading as low as 99.97 cents US - before moving higher.

The Canadian dollar opened at 101 cents US this morning, down 0.41 of a cent from Wednesday's close. The U.S. dollar stood at 99.01 cents Canadian, up 0.40 of a cent.

If a rising but fluctuating Canadian dollar is taken seriously then Canadian economic growth will gear down sharply in the third quarter.

The rising Canadian dollar and sagging U.S. demand for exports squeeze the heavyweight trade sector in Canada adversely.

The Bank of Canada meets on December 4, and the market is divided on whether it will cut its key overnight rate.

Qamrul A. Khanson is Freelance writer and author of several books on spirituality and interfaith studies. He could be reached at www.qamrulkhanson. net