North of the Border, Loonie Dips Below 83 Cents

By October 22, 2008Economy, Trade

From The Financial Post, “Canadian dollar skids to lowest close since 2005“:

TORONTO — The Canadian dollar skidded to its lowest close in more than three years versus the U.S. dollar on Tuesday as the Bank of Canada cut its key overnight interest rate and suggested more rate cuts may be needed….

The Canadian dollar closed at C$1.2137 to the U.S. dollar, or 82.39 U.S. cents, down from C$1.1937 to the U.S. dollar, or 83.77 U.S. cents, at Monday’s close.

A year ago, the Canadian dollar reached and then exceeded par with the U.S. dollar, causing real problems for Canadian manufacturers as their products (think auto parts) became much more expensive in the United States.

Since then, the Loonie has ….

The New York Times provides the conventional wisdom, which seems right, too. With an economy still based on commodities, when global economies are growing, things go well. When not:

Because some currency traders view the Canadian dollar as something of a petro currency, lowered expectations for oil prices have dragged down its value against the United States dollar. Provided that manufacturers can find customers in the United States, the decline in the Canadian dollar could ease some of the strain the companies felt after the currency floated at about par with the American dollar, effectively making their products more expensive.

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