More on the Loonie

The Bank of Canada announced today that they were keeping interest rates the same for the time being. The Canadian central bankers have been on a campaign to talk down the Loonie, which has been rising against the American dollar, yesterday closing over 97 cents. Inflation is under control, commodity prices are stable, and the GDP forecasts are on track for a sustainable recovery. 

There is concern that the rising Loonie could impact the price of Canadian goods on foreign markets which could stall the momentum of our economic recovery.

At least part of the worry is because the increase in the price of the Loonie has been uncoupled from an increase in the value of the commodities like oil, gas, minerals, lumber which we produce and export. An increase which is driven by speculators betting on the direction of the currency, and not on true economic value could have very negative consequences when the speculators turn to play in another area, and abandon the Loonie for richer pastures, leaving us to pick up the pieces and repair the damage to our economy.

http://www.bank-banque-canada.ca/en/fixed-dates/2009/rate_201009.html

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Filed under Canadian Dollar, Finance, Inflation, US Debt, US Dollar

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