A couple of years ago $1.00 Canadian bought 68 American cents; today it buys 108 cents. Relative to their cousins in Florida, Canadians have gained 60% in equity. Those Canadians who moved to Scottsdale, Arizona a mere two years ago can ill afford to return now. Enjoy the golf, guys! And have a taco on us.
Now, that was fun! Unfortunately, the strength of the Canadian dollar is cause for concern. Canadian exports to the United States will suffer and the rest of the world will not pick up the shortfall. On the other hand, Americans have borrowed gazillions of dollars when a buck was worth 100 cents. They will repay these loans in 65-cent dollars.
The Globe and Mail reports that the Bank of Canada will not cut interest rates this year.
The Bank of Canada is suggesting it will not move to cut its key interest rate despite the surge of the Canadian dollar above $1.08 (U.S.).
In a speech Tuesday in New York, senior deputy governor Paul Jenkins says that the risks to the Canadian economy posed by a stronger currency are higher than previously thought.
But at the same time, the risks that the Canadian economy could overheat because of excessive demand are also higher than thought just a month ago.
As a result, the bank’s key interest rate is fine just where it is, he said.
