Mike Jung
05-18-2007, 07:39 PM
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Dollar hits 30-year high
May 18, 2007
Lisa Wright
TheStar.com
Staff Reporter
Positive retail sales numbers gave the Canadian dollar another boost Friday to levels not seen since Pierre Trudeau was prime minister 30 years ago, and it may go even higher with the latest speculation that the Bank of Canada could raise interest rates.
“It’s been quite the day,” said Doug Porter, deputy chief economist at BMO Capital Markets.
The Canadian dollar closed up 0.77 to 91.79 cents (U.S.), the highest level since Oct. 11, 1977, after Statistics Canada said retail sales surged 1.9 per cent in March to $34 billion - a lot stronger than the 0.7 per cent rise economists had expected. The dollar had flirted with the 92 cents barrier all day, reaching as high as 91.94 cents.
The currency’s gain came on the heels of a 0.43-cent rise Thursday with more news of the Canadian economy firing on all cylinders with a better-than-expected inflation report for April.
The combination of strong economic data and the recent spike in energy and commodity prices is being seen as putting the Bank of Canada under pressure to raise interest rates after holding its policy rate unchanged at 4.25 per cent since last May.
Economists are wondering how high the loonie is going to go.
“That’s the $64,000 question,” said Porter.
“Once it broke through the 91-cent barrier it was just off to the races for the currency,” he said.
It likely won’t reach par with the U.S. greenback or go much above 96 cents because the Bank of Canada and financial markets would likely step in to protect manufacturers, who suffer when the loonie gets too high, said Craig Alexander, deputy chief economist for TD Bank Financial Group.
“It could easily reach 96 cents but parity would be a huge shock for exporters,” he said. “Right now it’s a boon to Canadian households because the price of clothing and footwear imported into Canada just got cheaper,” Alexander added.
However, the stock market isn’t that happy with the latest spike in the currency as a higher dollar makes it tough for exporters such as manufacturers and forestry companies.
Toronto’s S&P/TSX composite index added 4.63 points to 14,105.34. Energy, mining and telecom stocks gained while financials dragged ahead of quarterly earnings reports from the big banks coming down over the next couple of weeks.
Despite the lacklustre showing, the TSX managed to exploit a small breakthrough past the 14,000 mark this past week, gaining 101.52 points.
“I think what we have from a big picture is we are still very clearly in an upward trend,” said Julie Brough, assistant vice president at Morgan, Meighen and Associates.
“But I think that given the seasonality that we tend to get over the summer when you get a little bit of weakness, that it’s going to be harder moving the index. So I think we continue to trend up but I think it’s choppier.”
The TSX Venture Exchange was up 43.05 points to 3,279.6.
On Wall Street, the Dow Jones industrial average rose 79.81 points to 13,556.53 after the University of Michigan index of consumer sentiment for May came in at 88.7, higher than expected.
Another indication of firm U.S. consumer spending came as retailers J.C. Penney, Kohl’s and Nordstrom posted earnings that surpassed Wall Street projections.
The Nasdaq composite rose 19.07 points to 2,558.45 and the S&P 500 index gained 10 points to 1,522.75.
Microsoft Corp. said Friday it will purchase online advertising firm aQuantive Inc. for $6 billion (U.S.) in cash, while General Electric Co. was reported to be near an agreement with a Saudi industrial giant to buy GE’s plastics division for $11 billion.
On the TSX, the financial sector was down 0.6 per cent with TD Bank (TSX:TD) off 46 cents to $70.39 (Canadian) and Bank of Montreal (TSX:BMO) losing 31 cents to $69.09.
The energy sector was up 0.8 per cent. The June crude oil contract on the New York Mercantile Exchange was up eight cents to $64.94 (U.S.) a barrel. Petro-Canada (TSX:PCA) advanced 66 cents to $54.30 (Canadian).
Precision Drilling Trust (TSX:PD.UN) sagged $1.32 to $28.80 after cutting its distribution again, this time to 13 cents per unit monthly from 19 cents. Canada’s largest oilfield services provider cited “low equipment utilization levels . . . and an increasingly competitive pricing environment.”
Shares in Imperial Oil (TSX:IMO), a major player in the proposed Mackenzie Valley gas pipeline, jumped $1.28 to $49.99 after the head of an aboriginal consortium involved in the project said the federal government is considering at least a partial buyout of the energy companies involved.
On the TSX, advances beat declines 932 to 689 with 203 unchanged as 338.3 million shares traded worth $5.7 billion.
Vasogen Inc. (TSX:VAS) stock tumbled 49 cents or 13.9 per cent to $3.03 after it arranged with institutional investors to raise $16 million (U.S.) selling common shares at $3.25 each, plus warrants to raise additional $11.7 million.
Shares in cigarette maker Rothmans Inc. (TSX:ROC) surrendered 76 cents to $22.58 (Canadian) after its latest quarter’s profit rose to $18 million from a year-earlier $16.4 million while sales volumes slipped.
Toymaker Mega Brands Inc. (TSX:MB) swung to a first-quarter loss of $23.9 million (U.S.) following an additional $35.2-million charge for the partial recall of Magnetix building sets blamed in a child’s death. Its shares added 32 cents to $21.05.
China announced Friday it has widened the daily trading limit for the yuan against the U.S. dollar. American officials hope a stronger yuan will help to narrow the multibillion-dollar American trade deficit by making Chinese goods more expensive.
China has also raised interest rates for the fourth time in a year in a renewed effort to cool its sizzling economy.
With files from Canadian Press
:slim
PS: This should help out Canadians going to GAP '07 :D
Dollar hits 30-year high
May 18, 2007
Lisa Wright
TheStar.com
Staff Reporter
Positive retail sales numbers gave the Canadian dollar another boost Friday to levels not seen since Pierre Trudeau was prime minister 30 years ago, and it may go even higher with the latest speculation that the Bank of Canada could raise interest rates.
“It’s been quite the day,” said Doug Porter, deputy chief economist at BMO Capital Markets.
The Canadian dollar closed up 0.77 to 91.79 cents (U.S.), the highest level since Oct. 11, 1977, after Statistics Canada said retail sales surged 1.9 per cent in March to $34 billion - a lot stronger than the 0.7 per cent rise economists had expected. The dollar had flirted with the 92 cents barrier all day, reaching as high as 91.94 cents.
The currency’s gain came on the heels of a 0.43-cent rise Thursday with more news of the Canadian economy firing on all cylinders with a better-than-expected inflation report for April.
The combination of strong economic data and the recent spike in energy and commodity prices is being seen as putting the Bank of Canada under pressure to raise interest rates after holding its policy rate unchanged at 4.25 per cent since last May.
Economists are wondering how high the loonie is going to go.
“That’s the $64,000 question,” said Porter.
“Once it broke through the 91-cent barrier it was just off to the races for the currency,” he said.
It likely won’t reach par with the U.S. greenback or go much above 96 cents because the Bank of Canada and financial markets would likely step in to protect manufacturers, who suffer when the loonie gets too high, said Craig Alexander, deputy chief economist for TD Bank Financial Group.
“It could easily reach 96 cents but parity would be a huge shock for exporters,” he said. “Right now it’s a boon to Canadian households because the price of clothing and footwear imported into Canada just got cheaper,” Alexander added.
However, the stock market isn’t that happy with the latest spike in the currency as a higher dollar makes it tough for exporters such as manufacturers and forestry companies.
Toronto’s S&P/TSX composite index added 4.63 points to 14,105.34. Energy, mining and telecom stocks gained while financials dragged ahead of quarterly earnings reports from the big banks coming down over the next couple of weeks.
Despite the lacklustre showing, the TSX managed to exploit a small breakthrough past the 14,000 mark this past week, gaining 101.52 points.
“I think what we have from a big picture is we are still very clearly in an upward trend,” said Julie Brough, assistant vice president at Morgan, Meighen and Associates.
“But I think that given the seasonality that we tend to get over the summer when you get a little bit of weakness, that it’s going to be harder moving the index. So I think we continue to trend up but I think it’s choppier.”
The TSX Venture Exchange was up 43.05 points to 3,279.6.
On Wall Street, the Dow Jones industrial average rose 79.81 points to 13,556.53 after the University of Michigan index of consumer sentiment for May came in at 88.7, higher than expected.
Another indication of firm U.S. consumer spending came as retailers J.C. Penney, Kohl’s and Nordstrom posted earnings that surpassed Wall Street projections.
The Nasdaq composite rose 19.07 points to 2,558.45 and the S&P 500 index gained 10 points to 1,522.75.
Microsoft Corp. said Friday it will purchase online advertising firm aQuantive Inc. for $6 billion (U.S.) in cash, while General Electric Co. was reported to be near an agreement with a Saudi industrial giant to buy GE’s plastics division for $11 billion.
On the TSX, the financial sector was down 0.6 per cent with TD Bank (TSX:TD) off 46 cents to $70.39 (Canadian) and Bank of Montreal (TSX:BMO) losing 31 cents to $69.09.
The energy sector was up 0.8 per cent. The June crude oil contract on the New York Mercantile Exchange was up eight cents to $64.94 (U.S.) a barrel. Petro-Canada (TSX:PCA) advanced 66 cents to $54.30 (Canadian).
Precision Drilling Trust (TSX:PD.UN) sagged $1.32 to $28.80 after cutting its distribution again, this time to 13 cents per unit monthly from 19 cents. Canada’s largest oilfield services provider cited “low equipment utilization levels . . . and an increasingly competitive pricing environment.”
Shares in Imperial Oil (TSX:IMO), a major player in the proposed Mackenzie Valley gas pipeline, jumped $1.28 to $49.99 after the head of an aboriginal consortium involved in the project said the federal government is considering at least a partial buyout of the energy companies involved.
On the TSX, advances beat declines 932 to 689 with 203 unchanged as 338.3 million shares traded worth $5.7 billion.
Vasogen Inc. (TSX:VAS) stock tumbled 49 cents or 13.9 per cent to $3.03 after it arranged with institutional investors to raise $16 million (U.S.) selling common shares at $3.25 each, plus warrants to raise additional $11.7 million.
Shares in cigarette maker Rothmans Inc. (TSX:ROC) surrendered 76 cents to $22.58 (Canadian) after its latest quarter’s profit rose to $18 million from a year-earlier $16.4 million while sales volumes slipped.
Toymaker Mega Brands Inc. (TSX:MB) swung to a first-quarter loss of $23.9 million (U.S.) following an additional $35.2-million charge for the partial recall of Magnetix building sets blamed in a child’s death. Its shares added 32 cents to $21.05.
China announced Friday it has widened the daily trading limit for the yuan against the U.S. dollar. American officials hope a stronger yuan will help to narrow the multibillion-dollar American trade deficit by making Chinese goods more expensive.
China has also raised interest rates for the fourth time in a year in a renewed effort to cool its sizzling economy.
With files from Canadian Press
:slim
PS: This should help out Canadians going to GAP '07 :D