Canada’s Dollar Strengthens As Economy Improves

Posted December 22, 2009

Canada’s dollar strengthened against the US dollar for the third consecutive day. The US dollar strengthened against the euro. The franc fell against the euro as Greece and Spain deal with debt issues. The UK pound weakened as the country faces a threat of a continued recession. The Russian ruble weakened against the US dollar on oil production agreements by OPEC.

 

The Canadian dollar strengthened against the US dollar again making the third consecutive day. At one point this year there had been speculation the Canadian dollar would reach parity with the US and then the markets shifted and the loonie weakened. But possible parity is once again being discussed.

The Canadian dollar appreciated to C$1.0577 against the US dollar. This equates to one Canadian dollar buying 94.55 US cents. The loonie would have gone higher but gains were trimmed after oil price advances slowed.  Oil prices rose to $74.10 per barrel for January delivery.

In the US the good news was an increase in sales of existing homes for November by 7.4 percent. This is the highest rate seen since February 2007.The dollar strengthened against the euro to $1.4251 on the news of the home sales. The US recovery is moving ahead though slowly. Unemployment is expected to remain high through a good portion of 2010.

In Europe the recovery news is mixed. Greece’s debt rating was lowered by Moody’s Investors Service. The rating was lowered to A2 from A1. The small reduction was a surprise given the poor condition of the budget and the country’s massive debt.  Greece’s debt is 12.7 percent of the GDP. The European Union rules require member countries to keep their debt at 3 percent of GDP or less.

Greece is not the only European country with debt problems. Spain’s outlook has been reduced to negative.  Spain has a larger economy and continuing debt problems could impact the Euro-Zone’s pace of recovery into 2010.

The Swiss franc saga continued with the franc ending a 4 day rising streak against the euro. The central bank has been intervening in the currency market since last March but recently indicated it would refrain from further intervention unless the franc shows signs of strong movement.

The franc fell to 1.4976 francs against the euro. The Swiss economy is improving with exports growing by 1.6 percent in November compared to the prior month.  Growth is expected to remain subdued well into 2010.

The UK pound has not changed much over the last couple of weeks when paired with the US dollar. But the UK economy is not doing as well as some of its neighboring countries. The pound fell to $1.5922 against the US dollar.

The UK debt needs to be reduced or the country faces a credit rating downgrade.  The UK is seen as having the most risk among AAA countries.  Standard & Poor’s has already issued a negative outlook on the UK.

As proof the UK economy is still at risk of sliding back into recession, the GDP contracted in the 3rd quarter of this year by 5.1 percent. This was more than projected by economists.

The Russian ruble weakened against the US dollar in response to the results of a meeting of OPEC ministers. OPEC agreed to leave oil production levels unchanged. The ruble fell to 30.5550 rubles per dollar.

The ruble is measured against a basket of currencies made up of the US dollar and euro. The central bank defends the ruble within a band of 26 to 41 against the basket. Currently the ruble is at 36.4225 which is well within the band.

 

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