Canadian dollar near 140-year low
Editor's Note: The following story is printed in Canadian.
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USA TODAY - Asia isn't the only region where battered
currencies are struggling. The Canadian dollar remained
dangerously close to a 140-year low Monday, and the
outlook is murky.
The bruised Canadian dollar -- nicknamed the ''loonie'' after the image
of a loon on the $1 coin -- has boosted the buying power of the U.S.
dollar and drawn thousands of Americans across the border in search
of bargains on everything from airline tickets to furniture.
In a bid to stop the decline, the Bank of Canada, Canada's equivalent of
the Federal Reserve, raised a key target for short-term interest rates
half a percentage point Friday to 5 percent. The comparable rate in the
USA is 5.5 percent.
The move helped boost the Canadian dollar to 68.8 cents in U.S.
currency, up a half-cent Friday. The loonie hit 68.1 U.S. cents
Thursday, the lowest since its creation in 1858. It remained at 68.8
cents Monday.
''We should be near a bottom, but it's too early to say for sure,'' says
Mark Chandler, economist at Goldman Sachs Canada in Toronto.
Economist John McCallum at Royal Bank in Toronto says it's a
bonanza for U.S. consumers who live near the world's longest
undefended border (3,987 miles). The 6 percent drop in the Canadian
currency's value the past two months has made Canadian goods
cheaper for U.S. shoppers.
Same-day car trips by U.S. residents hit a 16 1/2-year high in
November, the most recent month for which data was available. On
weekends, cross-border shoppers are being turned away from the
$19-each-way train from Seattle to Vancouver, British Columbia.
''They're flocking to restaurants and shopping malls and buying
everything in sight,'' says economist Sal Guatieri of Bank of Montreal in
Toronto.
It's easy to bring the booty back. There is no limit on Canadian-made
goods being brought into the USA, thanks to the North American Free
Trade Agreement of 1993.
But U.S. businesses that compete with Canadian companies aren't
thrilled. Canada is the USA's largest trading partner; more than 80
percent of Canada's exports end up in the USA.
''It must be exacting a fair amount of pain on U.S. producers,'' says
economist Andrew Pyle at ABN Amro Bank Canada in Toronto.
Although Canada's economy is solid, it is feeling the effects of the
Asian financial crisis. Global commodity prices have fallen because
investors think demand for raw materials will be weak until Asia
recovers. That has hit Canada hard, because more than 30 percent of
its exports are raw materials such as minerals and lumber.
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