No more jokes about the loonie
After years of jokes about 'Monopoly money', the Canadian dollar - or loonie - is finally getting its own back. The currency is now close to parity with its US counterpart - and could be a better long-term bet.
Canadians have endured "years of American jokes" about Canadian "Monopoly money", as Steven Chase notes in Canada's Globe and Mail. But the Canadian dollar, or loonie, is fighting back: it is now at a 30-year high of around 97 US cents. Parity "here we come", says Dennis Gartman of the Gartman Newsletter.
The loonie has been buoyed by soaring prices for commodities, which account for more than half of Canada's exports. These have created a current account surplus and helped the government balance the budget. Everything Canada produces "is in piping hot demand", says Douglas Porter of BMO Nesbitt Burns. And while US rates are heading down, Canadian ones are likely to stay on hold given recent solid data.
It's no surprise, then, that foreign investors are becoming increasingly interested in the loonie and that the performances of the US and Canadian dollars have been diverging since May. "We're seeing a clear decoupling between the strength in Canada", fuelled by the emerging world's demand for commodities, and the "lacklustre economic situation in the US", according to Boris Schlossberg of Forex Capital markets. He reckons the US and Canadian dollars should be worth the same by the end of the year. Canada's economy remains relatively highly exposed to the US, so a sharp slowdown there may take the shine off the loonie in the short term. But given that Canada has "got all those things the world needs", longer-term, the loonie looks likely to be stronger than the US dollar, says John Taylor of FX Concepts.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Ofgem proposes new energy tariffs with low or no standing changes
Standing charges have invited public backlash as households battle high energy bills
By Katie Williams Published
-
Google shares bounce on Gemini 2.0 launch
Google has launched the latest version of its Gemini AI platform, and markets have responded positively. Is it time to buy Google shares?
By Dan McEvoy Published