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Strategies & Market Trends : Canadian Dollar
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To: TAPDOG who wrote (55)12/27/1997 12:33:00 PM
From: Ed Huang  Read Replies (1) of 103
 
The Quebec separation movement went down after they got defeatet
in the referendum in Oct 1995. The separatists are in a weaker
position now. I don't think the separation problem will come back
to affect on the CDN dollar or the financial markets in the near future.

I haven't had a chance to get a copy of yesterday's WSJ yet. I
will appreciate it if you can post some main points of the
article. I guess the WSJ said something good about Canada is
because they see the CDN $ value and they don't want to see
further weakness in this currency either and tried to come out
to help.

As I can see, there are a few strong and weak points in the value
of CDN dollar.

The strong points:

* Very low inflation in Canada.

* Steady growth in Cdn economy.

* Federal and provincial government deficit have come down
sharply in the recent 2 years and the situation is improving.

* Surplus in international trade.

* Interest rate is lower than the US interest rate. There's
some more room for the Cdn central bank to raise the interest
rate when they see it's necessary.

The weak points:

* The unemployment in canada is still stubbornly high at about
9% (while in US is about 4%). Economy is not as strong as in
the U.S.

* Asian economy affect on the Cdn $.

Investors will eventually come down the basic from time to time
and compare the buying power of the two currencies and settle in
a reasonable exchange rate. Some investors think CDN is quite
undervalued at this level and I tend to believe so.
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