Currency - redux?

[Thrawn]

Originally posted by Tiger
And we are still riding a 2 year old thread?

I like to keep the info on this subject together, in order to maintain context.


"Loonie hits modern-day high above $1.06 US
Last Updated: Wednesday, October 31, 2007 | 6:25 PM ET
CBC News



The Canadian dollar surged to a modern-day high against the U.S. dollar late Wednesday after the Federal Reserve cut interest rates again and oil prices surged to another all-time high.

In after-hours trading, the loonie went as high as $1.0617 US, eclipsing the previous 50-year high of $1.0614 US set on August 21, 1957.

That's the highest the Canadian dollar has climbed since it was allowed to float in 1950.

You have to go back more than a century to find a time when the Canadian dollar was worth more.

According to a history of the dollar posted on the Bank of Canada website, the U.S. dollar plunged in 1864 as the Confederate Army approached Washington during the U.S. Civil War and the Union government temporarily shut down gold trading.

On July 11, 1864, the Canadian dollar was worth $2.78 US.
Continue Article

"This represents the all-time peak for the Canadian dollar in terms of its American counterpart," author James Powell wrote.

But there is some question about whether the two currencies can be validly compared to each other at that time. The Bank of Canada web site only lists exchange data going back to 1950.

It was just six weeks ago that the loonie reached parity with the U.S. dollar for the first time in 30 years. It's just kept climbing since.

It's risen by 23 per cent against the U.S. dollar since the start of the year.  

The loonie's rise Wednesday was again due, in part, to another drop in the worldwide value of the U.S. dollar.

Wednesday afternoon's Federal Reserve rate cut helped to drive down the greenback against most major currencies. It reached a record low against the euro."

http://www.cbc.ca/money/story/2007/10/31/dollarjump.html

[Torque]

bush is good for the canadian economy... i'll grant him that.

[Thrawn]

"Iran stops accepting U.S. dollars for oil
16:34    |    08/ 12/ 2007
   

TEHRAN, December 8 (RIA Novosti) - Iran has stopped selling its oil for U.S. dollars, the Iranian ISNA news agency said on Saturday, citing the country's oil minister.

"In line with a policy of selling crude oil in currencies other than the U.S. dollar, the sale of our country's oil in U.S. dollars has been completely eliminated," ISNA reported Oil Minister Gholamhossein Nozari as saying.

He also said "the dollar is no longer a reliable currency."

Iran is the world's fourth-largest crude oil producer."

http://en.rian.ru/world/20071208/91488137.html

[Viking]

Oh shait ... here we go.

[storch]

well looks like iran better go with i ran.  I wonder if our ordenance is still reliable enough for them.

[Maverick]

Just the tit for tat regarding economic sanctions.

[john9001]

china has signed a oil deal with iran, will china pay iran with Yuan?

[Thruster]

Here I was all ready for some haggling regarding global economic theory and a bit of lively debate on Fed policy but now I'm lost.

But since I spent the time scanning this can of worms we call a thread I just want to pick out a few points.

We ain't buying eggs from the farmer down the lane. Using this kind of analogy anywhere in a discourse about modern domestic monetary policy is like starting a discussion about unified field theory with the story of Newton's apple.

The Fed is not a clearinghouse for private lenders' speculative lending operations. It's there to serve as a lender of last resort should certain conditions occur. To that end it also functions as this country's accountant.

Military might nor political influence do not necessarily go hand in hand with international acceptance of any denomination, it helps but not a rule. (see Japan) Monetary and domestic investment policy is much more a deciding factor.

Selling a Bond affects it's value by virtue of the % return it will bear. The best thing for the value of the U.S.D is diversified international holdings. Watch one nation dump U.S. debt. I bet a bunch of players will convert riskier instruments (national and corporate) if for no other reason than flight to value. Massive diversification of debt is an amazing tool. Just ask Donald Trump. What hurts the U.S.D hurts everybody.

One needs to understand World Bank reserve requirements as well as how currency pricing affects net exporters before assuming we have the most to lose regarding inflation. With globalization, the benefits of isolationist and protectionist policy become even more unfulfilled save for a very few nations at a specific point in their respective economic maturations.

I'm sure I forgot something but I don't think it really matters.

[Suave]

Here's  Ron Paul Youtube video. I'm not trying to hijack, this video is about the US dollar.

http://www.youtube.com/watch?v=XaxdUPNYj2s

[Holden McGroin]

Since Nov 7, 2007, the Canadian Dollar has lost 9% of it's value as measured against the American Dollar.

Canada is doomed.

[moot]

What's with the music on that Ron Paul video?

[bj229r]

Is it too simplistic to say that the low interest rates in the US are behind the loss of the value of the dollar?

[Thruster]

If you are saying that low rates are the reason U.S.D. pricing declines then the answer is "partially"

Interest rates are generally the "price" of borrowed money. If there is little demand then of course there will be a lower cost to obtain it. If you are talking about exchange considerations, it gets fuzzy.

Player one may see lower rates and chose the Dollar over another denomination when looking to borrow, creating dollar demand.

Player two may see the reduced yield as a negative and move to a higher yielding denomination to place equity into interest bearing instruments, lowering demand.

Player three may require repatriation from dollar based assets to his native denomination for any number of reasons and to whom pricing and rates have little bearing. Dollars get sold the market accommodates.

Player four may want or need to get his capitol out of his native denomination (or any other for that matter) and for pragmatic purposes finds the U.S.D. to be the most attractive vehicle.

Of course you also have the guy who trades Rubles for Yen, then trades again for Dollars because there's a divergence he can capitalize on. (Ruble stronger against Yen than U.S.D, Yen stronger against Dollar than an alternative like AUD.)

There are a couple of different rates quoted on U.S.D. depending on where the transactions take place and who the counter parties are. Sometimes they move in step with each other, sometimes not.

It is possible for domestic demand to place a premium on a currency where there is diminished demand worldwide, creating a discount.