Loonie back at par

Last Updated: Thursday, December 20, 2007 | 11:18 AM ET
CBC News
The Canadian dollar was trading above par with the U.S. dollar for the first time in more than two weeks on Thursday.

The loonie was quoted at $1.0018 US in mid-morning trading, up just over half a cent from Wednesday's close. It went as high as $1.0045 US in earlier trading.

"It doesn't appear that there was any news to fuel the move, likely just a big buyer," said BMO Capital Markets economist Benjamin Reitzes.

The loonie hit a modern day high of $1.1030 US in early November before it began a steady retreat as investors sold off positions in the Canadian dollar as commodity prices slipped from record highs.

The dollar fell below 98 cents US on Dec. 13 before slowly recovering to parity.

Since early 2002, when the Canadian dollar was worth 61.79 cents US, the currency has seen a steady increase in value as prices of oil and other commodities Canada surged and the U.S. dollar weakened against a wide range of currencies.

Lofty loonie named Time's top Canadian newsmaker

Last Updated: Thursday, December 20, 2007 | 6:41 AM ET
CBC News
The Canadian dollar made headlines throughout 2007, and its turn from lacklustre to lofty secured its fame Thursday as Time magazine's Canadian Newsmaker of the Year.

Over the past 12 months, the loonie has flirted with parity and smashed record highs against the U.S. greenback.

It began the year at 87 cents and for the first third of the year seemed to be a currency that had peaked.

Then in April, the loonie's value began to climb. It was trading at 96 cents by July.

"And suddenly what seemed unthinkable was entirely possible — that we could have a Canadian dollar worth the same as the U.S. dollar," said CBC's business host Danielle Bochove.

In late summer, though, the explosion of the subprime debt crisis south of the border created a bit of a setback as global investors scrambled, abandoning the Canadian loonie.

But as markets stabilized, the loonie resumed its climb and hit parity in September.

The Canadian dollar rose to $1.10 US in early November before falling in the middle of that month.

Michael Elliott, international editor of Time, said there were other candidates for the title, such as former media baron Conrad Black, but the loonie interested him because it represented a wider issue.

"The currency of Canada is not solely a Canadian story. It's a global story that has to do with changing balances in the international economy and significantly … a weakening of the American economy," he told CBC News.

Time's Canadian Newsmaker of the Year is an annual editorial special that began more than 10 years ago.

Time defines the newsmaker as the person, place, group or thing that has the most impact — for better or for worse — on the news in Canada.

Loonie briefly dips below parity as oil prices tumble

Last Updated: Tuesday, November 27, 2007 | 5:30 PM ET

CBC News

The Canadian dollar briefly fell below parity with the U.S. dollar on Tuesday, as oil prices shed more than $3 US a barrel.

The loonie dipped as low as 99.97 cents US in mid-afternoon trading, the Bank of Canada told CBCNews.ca.

That marked the first time since Oct. 4 that the Canadian dollar was worth less than its U.S. counterpart. But the loonie's journey below parity lasted only a few minutes. The dollar quickly regained ground to close the trading day at $1.0050 US, which was off 0.39 of a cent from Monday's close.

The Canadian dollar reached parity with the U.S. dollar on Sept. 20 — the first time it had been that high in almost 31 years. It continued to rise over the next few weeks, topping out at $1.1030 US on Nov. 7. In the three weeks since, however, it has been on a long slide.

Some analysts say it's simply a case of the value of the dollar falling after going up too quickly.

Allison Mendes, portfolio manager with MFC Global Investment Management, said the loonie needed to come down. "It was in overbought territory," she told CBC News.

Steve Butler, director of foreign exchange trading at Scotia Capital Markets, called it "a healthy correction."

BMO Capital Markets said the number of Canadian dollar "net longs" — the difference between the number of futures contracts that are betting the loonie will rise and the number betting on a fall — is it the lowest level in eight months. That "net long" number has fallen for six straight weeks as traders increasingly bet against a rise in the Canadian dollar.

Curbing the loonie's ascent has been the expectation that the Bank of Canada may cut interest rates to keep the economy going. The bank's next interest rate decision comes on Dec. 4.

Also weighing on the Canadian dollar Tuesday was a sharp drop in the price of crude oil. On the New York Mercantile Exchange, January light sweet crude was down $3.28 at $94.42 US a barrel.

The sharp drop came amid reports that members of OPEC are considering an output increase to help reduce the price of oil, which hovered near $100 US a barrel recently.

Concerns over an economic slowdown that could reduce demand were also cited by analysts as contributing to Tuesday's drop in prices.

Iran leader dismisses US currency

Iranian President Mahmoud Ahmadinejad has suggested an end to the trading of oil in US dollars, calling the currency "a worthless piece of paper".

The call came at the end of a rare Opec summit, and was opposed by US ally Saudi Arabia.

The Iranian president had wanted to include the attack on the dollar in the summit's closing statement.

The communique made little mention of the dollar, however, focusing instead on energy security and the environment.

The summit in Saudi Arabia was only Opec's third in 47 years.

During the talks, Opec members revealed differences about the future direction of the exporters' group.

But Opec leaders ended with a pledge to provide the world with reliable supplies of oil.

Unfair trade?

Speaking after the end of the summit, Mr Ahmadinejad said all leaders at the meeting were unhappy with recent falls in the value of the dollar.

The dollar has weakened considerably against the euro and other currencies in the past 12 months.

Its decline has affected the revenues of Opec members because most of them price and sell their oil exports in the US currency.

Mr Ahmadinejad said that all Opec countries had showed interest in converting their cash reserves into other currencies.

"They [the US] get our oil and give us a worthless piece of paper," he told reporters.

But Saudi officials were against including any such language in the declaration. One is reported to have warned that it could add to the pressure on the dollar.

However, in the communique Opec did make a reference to the debate, by committing itself to studying "ways and means of enhancing financial co-operation".

Iran's oil minister said that this would allow the formation of a committee to study the dollar's affect on oil prices and investigate the possibility of alternative trading currencies.

Political agenda

The summit was also marked by divisions over the role of Opec in the world oil market.

Venezuelan President Hugo Chavez and his Ecuadorean counterpart, Rafael Correa, whose country rejoined Opec at the summit, both argued for a more political agenda for the group, but ran into opposition from US ally Saudi Arabia.

King Abdullah, the head of state of the host nation, Saudi Arabia said: "Those who want Opec to take advantage of its position are forgetting that Opec has always acted moderately and wisely.

"Oil shouldn't be a tool for conflict, it should be a tool for development."

President Chavez had opened the meeting with a warning that oil prices could double if the US attacked Iran.

Oil has been hitting record peaks of well over $90 a barrel as markets believe the Organisation of Petroleum Exporting Countries will not boost production, despite calls from oil-consuming countries such as the US to do so.

Venezuela's president said the price of crude could reach $150 or even $200 a barrel.

Canadians shopping in U.S. pushing border resources to limit

They're filling a border refugee processing centre to capacity on the weekends, but these weary travellers entering Canada from the U.S. aren't seeking asylum — they're cross-border shoppers lured south by the loonie's record-breaking showing against the Yankee greenback. Bargain-hungry shoppers — often arriving by the busload — have been choking key border crossings across the country on weekends, straining resources at the border and forcing officials to scramble to find staff and facilities to process their purchases. In Ontario, a building intended to handle refugee claimants has been pressed into service to deal with the sheer volume of shoppers. All across Canada, the story is much the same as Canadians cash in on a dollar that's been worth more than its U.S. counterpart for weeks. Residents of St. Stephen, N.B., endured a two-kilometre lineup of vehicles snaking through their small town bordering on Maine during the Remembrance Day weekend. At the same time, the wait at the Pacific Highway border crossing in Surrey, B.C., was about four hours long. In Ontario, the crush of cross-border shoppers has led to extraordinary measures. Last Sunday, 50 chartered shopping buses carrying up to 55 people each began arriving after 4 p.m. at the Fort Erie crossing from Buffalo. With no personal exemptions on same-day travel purchases, hundreds of shoppers had to be processed for tax and possible duty payments. "We had to park the buses in our commercial area so that we could orderly process them, [and] we did open up extra facilities," said Jean D'Amelio-Swyer, a spokeswoman for Canada Border Services Agency. "We opened up a refugee processing centre and we had some extra cashier capability."
Problem is, there's only so many people you can put in those buildings at the same time, said D'Amelio-Swyer. As a result, after waiting an hour to cross the border, same-day shoppers then faced a two- to three-hour wait for customs agents to process their goods. "At minimum, these people have to pay PST and GST on their goods," she said. "There may be some duties applicable if the goods are not made in North America." Border agents were already working with stretched resources before the dollar's historic climb and many are now working overtime to handle the current crush, said Ron Moran, president of the Customs Excise Union. "It's still relatively early as a phenomenon, but we're already hearing that they won't be able to hold that line indefinitely," Moran said.
Early stages of bargaining
The country's 10,000 customs and immigration offers have been without a contract since June 21 and are in the early stages of collective bargaining, but no job action is planned, he added. "If the union were to start exercising pressure, it would get disastrous pretty quickly, [but] we're not suggesting that we're at that stage," he said. On a relatively calm Tuesday afternoon at the Queenston-Lewiston border crossing near Niagara Falls, Ont., shoppers that passed through customs after a mere 30-minute border wait weren't all that impressed with the goods to be had south of the border. "There wasn't any really huge deals. There was some on video games, which I primarily came for. It was mostly toys and stuff for Christmas," said Gina Robinson, 38, who made the two-hour trip from her home in Aurora, Ont. "I probably wouldn't be in a huge hurry to come back because it's the whole headache with the border. We were panicking, looking at our watches thinking, 'What time are we leaving, what time are we leaving?' " How high would the dollar have to go to lure Robinson back to the malls in New York state?
Deal on turkey
"A buck-fifty. In my perfect world, yeah. Otherwise, no." All the bargain hunting amounted to little more than Thanksgiving turkey for another Ontario woman who made the trek. "I feel the prices were not that good, about the same as in Canada," said Pauline Rochon of Lowbanks, Ont. — about an hour's drive from the Queenston bridge. When asked if she managed to ferret out any deals, Rochon replied: "Only on turkey at 29 cents a pound." The loonie's strong performance has turned border traffic flow in Surrey, B.C., somewhat on its head, said Len Dasilva of the West Coast Duty Free shop. "The busiest use to be on a Sunday when U.S. traffic was heading back. It's switched to Friday and Saturday now," said Dasilva.
'Buying habits are different'
"We lost the U.S. traffic and made it up with Canadians somewhat, but the buying habits are different. Canadians tend not to spend as much per head as Americans." The same-day shopping phenomenon has also struck the Prairies, saddling border agents there with the same crush witnessed in Ontario and elsewhere. "We used to get the 48-hour exemption, the weekend traveller. But now we're seeing more and more same-day travellers," said Loretta Nyhus, Canadian Border Services Agency spokeswoman for the Prairie region. The limited facilities and staff to process those travellers "reduces our capacity to open up additional lanes because there's only so much capacity within the office." Anyone who's still eager to spend their loonies in the U.S. might want to do it on a weekday to avoid spending several hours in a refugee processing centre with busloads of shoppers, D'Amelio-Swyer said. "Anyone who's got the opportunity to plan a shopping trip on a weekday, that might be a better alternative because right now on weekdays we're not having this huge surge of buses coming back."