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To: Terry Rose who wrote (16402)	8/22/1998 9:44:00 PM
From: Gary	Read Replies (2) \| Respond to of 116762

Terry, I'd be most interested in knowing more about that Cnd. $$ devaluation article. I have a vested interest and so far have no complaints but like to read all I can about it. I am still bearish on the Cnd. $ and live here in Canada. How much further down can it go??

To: Terry Rose who wrote (16402)	8/23/1998 5:33:00 AM
From: Alex	Respond to of 116762

Hi Terry. Good to hear from you again. Thanks for that info on the loonie. Here's a related article..................... '62-cent dollar inevitable' Economist says interest rates must rise to save currency Tod Mohamed The Ottawa Citizen It's the 64-cent question: What do you do with a nosediving dollar? Yesterday, the dollar blasted through the psychologically significant 65 cent U.S. barrier for the first time, closing at 64.86 cents. And it could keep right on falling below 62 cents if the Bank of Canada doesn't raise interest rates soon, one economist says. "A 62-cent dollar that's inevitable if we don't raise interest rates," said Warren Jestin, chief economist for Scotiabank. "We are at the stage where we need some damage control." According to Mr. Jestin, the currency's free fall continues to be fuelled by jittery international investors scared off by the Asian crisis from all but the most secure investments -- mainly denominated in U.S. dollars. Even though Canada's economy continues to chug along steadily, as noted yesterday by Prime Minister Jean Chretien, the psychological toll of a weak dollar could begin to have real economic effects here very soon. Mr. Jestin thinks the Bank of Canada should move now to crank up interest rates at least a half of a per cent, perhaps more, to bring investors back. "The markets aren't being driven by fundamentals. They are being driven by emotion and concern," Mr. Jestin said. "At a certain point, you begin to undermine investor confidence and consumer confidence" with a plunging dollar. "Because we have so much foreign investment here and so much trade It's fundamentally destructive to our long-term economy. You wouldn't think this is the time to raise interest rates -- inflation is virtually non-existent (and) if anything the economy is slowing down. "But in order to stabilize the economy, I think (raising interest rates) is almost unavoidable." Even with that, the dollar's recovery would be modest. Raising interest rates could stabilize the dollar in the 63- to 66-cent range, Mr. Jestin said, but before more substantial gains are realized, the Asian economies must recover. But as the dollar continues to hit historic lows, there is still no consensus as to what -- if anything -- should be done. Talk to any number of economists or prominent Canadian business people, and it seems you'll get a different solution from each one for Canada's currency woes. There's only one thing on which the experts seem to agree -- that there are no limits to the depths the Canadian dollar could plumb in the weeks to come. "Are the markets going to take it lower? That's the way it appears," said Doug Porter, a senior economist at Nesbitt Burns. "I don't think we've seen the bottom of the currency. I think the Bank of Canada showed it was trying to defend something close to 65 cents. Now that we've gone through that with the tide moving against the currency, it could easily go toward 62 cents." But according to John McCallum, chief economist for Royal Bank, there is little the federal government could do or should do to prevent a further slide in the dollar. "There's nothing wrong with Canada. We certainly have our policies right. We have inflation at next to nothing, we have deficits spinning into surpluses," Mr. McCallum said. "The only real way to prop up the Canadian dollar is to raise interest rates substantiallyE-- and that would be for more serious for millions of Canadians than the inconvenience of a lower dollar." Defending the 65-cent U.S. mark by buying up Canadian currency was valiant, said Mr. McCallum, but now that that tactic has failed, no one should be too alarmed. "I don't believe very strongly in psychological levels," he said. "I don't think they should draw any lines in the sand. We have a floating currency, and the market can determine its (value)." Corel Corp. chief executive Michael Cowpland is against raising interest rates, too. He believes a tax cut is the way to currency stability. "The feds just seem to sitting on their thumbs," Mr. Cowpland said. "They could be turning the (budget) surplus into a tax cut." That in turn would restore international confidence in Canada's economy and bring investors flocking back, he said. "The message is loud and clear, and the feds just can't see it," Mr. Cowpland said. But Mr. Jestin wasn't so certain. Canada's budget surplus was a very bright spot for foreign investors, one the government should not be to quick to let fade. "I don't think this is the time to give away tax revenue," Mr. Jestin said. If there is a tax cut "the good news -- the great news -- (about the budget surplus) is inevitably going to slow down." ottawacitizen.com