Money Sense

[Anonymous]

West Texas Intermediate has now given back everything it has gained this year. The culprit of course is larger than expected crude inventories in the US. The low rig count should reduce that number by the end of this year. The loonie is down about a cent and a half too from it's highs this year. Both the Dow and the TSX are bleeding red this morning.

[Anonymous]

The loonie was trading at 78.39 cents US, up 0.86 of a cent, shortly after 3 p.m. ET.



Tuesday's rise added on to Monday's gain of 0.6 cent, which drove the loonie through 77 cents.



The loonie has been on the rise since it bottomed out at 68 cents US in January.



Contributing to the flight of the loonie has been a rebound in the price of oil. The price for the May contract for West Texas Intermediate crude oil closed up $1.81 US, or more than four per cent, to $42.17 US per barrel, the highest finish this year and the best since November.



Oil's jump on Tuesday came after Russia's Interfax news agency reported that Russia and Saudi Arabia had reached agreement on an output freeze before a meeting of OPEC members and some outside petroleum producing countries in Doha, Qatar, on Sunday.



Oil has regained ground since it touched its recent low on Feb. 11 at $26.21 US a barrel.



Interest rate watch



Despite the recent oil-fuelled run-up by the Canadian dollar, the longer term expectations among those who track the loonie are not as positive.



According to a Bloomberg survey of currency watchers, the median estimate calls for an exchange rate of $1.33 Canadian per U.S. dollar by the middle of the year. On Tuesday, one U.S. dollar was trading just above $1.28 Cdn.



Some recent good domestic economic news means the Bank of Canada is expected to remain on a cautious footing on Wednesday when it makes an interest rate announcement and releases its latest monetary policy report.



"Acknowledging the Canadian economy's resilience ... but not ringing the all clear in such fashion as to light up the currency even further and put upward pressure on market rates would likely be a prudent approach," Scotiabank economists Derek Holt and Dov Zigler said in a commentary.



Meanwhile, the U.S. Federal Reserve is expected to raise interest rates, which could attract investors to the U.S. dollar.



"As we expect the U.S. economy to be healthy enough to warrant two hikes by the Fed this year ... while oil prices should recede slightly in Q2, we expect the [Canadian dollar] to depreciate against [the U.S. dollar] on a three-month horizon," said Thomas Julien and Yuze Yuan, economists with financial services company Natixis, in a commentary.



TSX up sharply



Equity markets were also enjoying a strong session on Tuesday.



In Toronto, the S&P/TSX composite index was up 187 points, at 13,610.



On U.S. markets, the Dow Jones Industrial Average climbed 174 points to reach 17,730, while the Nasdaq composite index added 37 points to hit 4,870.

[Anonymous]

WTI's front-month contract settled up $1.29, percent, at $45.33 a barrel, after hitting a 2016 high at $45.62.



Declines in the dollar make oil and other commodities denominated in the greenback more affordable to holders of other currencies.



Futures of heating oil, also known as ultralow sulfur diesel, jumped 3 percent as stockpiles of distillates, which include ULSD, fell much more sharply than expected, the EIA data showed.



With crude inventories building and the Saudis still pumping at record levels, we feel the recent run-up has been mainly fueled by the weakness on the dollar," said Tariq Zahir, trader and portfolio manager at Tyche Capital Advisors in New York.



The prospect of a production freeze among the world's largest oil exporters evaporated almost two weeks ago after a meeting between OPEC and Russia ended in stalemate.

[Anonymous]

http://business.financialpost.com/news/economy/canadian-dollar-is-getting-hammered-today-on-dismal-trade-and-fire-in-the-oilpatch">http://business.financialpost.com/news/ ... e-oilpatch">http://business.financialpost.com/news/economy/canadian-dollar-is-getting-hammered-today-on-dismal-trade-and-fire-in-the-oilpatch

TORONTO — The Canadian dollar weakened to a two-week low against its U.S. counterpart on Wednesday after disappointing domestic trade data and as a wildfire threatened production in the country's oil sands region.



The trade deficit in March unexpectedly widened to a record C$3.41 billion ($2.66 billion) as exports sank for a second month on widespread weakness, Statistics Canada data indicated.



"The Canadian dollar isn't helped by awful trade figures," said Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London, who expects the loonie to weaken to $1.33 by the end of 2016. "It's starting to call into question the rebalancing story that many have bought into recently."



The economy remains on track to grow more than 3 per cent in the first quarter, but the data provides a "weak handoff" going into the second quarter, said Paul Ferley, the assistant chief economist at Royal Bank of Canada.

[Anonymous]

Oil futures soared past $46 a barrel on Wednesday to settle at their highest level in more than six months.



The climb was supported by a U.S. government report that revealed an unexpected weekly drop in crude inventories and a ninth straight week of falling domestic production.



June West Texas Intermediate crude CLM6, -0.50%  tacked on $1.57, or 3.5%, to settle at $46.23 a barrel on the New York Mercantile Exchange. The settlement was the highest since Nov. 4. July Brent crude LCON6, +4.13%  on London's ICE Futures exchange added $2.08, or 4.6%, to end at $47.60 a barrel.



The TSX closed slightly higher and the Dow was up 214 points.

[Anonymous]

The surging loonie has been one of the top stories over the past several months—it plunged from a high of 1.46 in January to 1.26 (one U.S. dollar equals $1.26 Canadian dollars).



But over the past three months, the loonie has outperformed all the G10 Nation currencies against the U.S. dollar. The surge in the loonie is the result of rising oil prices and the market moving past the idea of a potential Bank of Canada rate cut. The end result is that speculators are now more long than short the Canadian dollar.



Going forward, however, many analysts see this changing. Macquarie, for example, sees the Canadian dollar falling to US$0.59 over the next few years, meaning the trend for the Canadian dollar will be down. Here's why the Canadian dollar could be headed downwards and what it means for your portfolio.



Why the Canadian dollar has little strength left



In a recent BNN interview, John Johnson, the chief strategist at Davis Rea, claimed that the Canadian dollar could possibly rise to a high of US$0.90 before falling to a long-term low of US$0.55 cents. This view is shared by Macquarie, and the basic idea is that the days of the Canadian dollar trading at parity with the U.S. dollar (like it did back in 2010-2013) are now over.



Even over the short term, it is very likely the Canadian dollar will see further weakness. Not only is the U.S. dollar likely to appreciate in the near term as the Fed will likely have one rate hike this year (which is not priced in by the market), but the Bank of Canada also has an interest in keeping the Canadian dollar weak.



A weak Canadian dollar helps Canadian exports become more competitive (especially firms that export to the U.S.). Canadian products basically go on sale as the Canadian dollar weakens, and this weakness is an important aspect of strengthening Canada's non-energy sector. It is for this reason that the Bank of Canada recently stated that non-energy exports are expected to be weaker because of the recent strength in the Canadian dollar, and that further strength could harm Canada's attempt to switch from commodity exports to services and manufacturing.



In other words, since the oil boom is now over, Canada will need a weaker currency to stay competitive in the North American supply chain. The massive rally in the loonie that occurred during the 2000s was largely due to a global commodities boom that saw rising oil prices and increased investments in oil and gas.



Going forward, the Bank of Canada sees the commodity sector share of the economy equaling levels that it was at before the boom in commodities. It is important to note that before the commodities boom, the Canadian dollar hit a low of US$0.62, and, since the 1970s, was almost always in a steady decline against the U.S. dollar.

[Anonymous]

What It Means For Your Portfolio



Several names benefit from a weaker Canadian dollar, especially names that have U.S. operations but are based in Canada and report in Canadian dollars. Earnings from U.S. operations will receive a boost when translated back into Canadian.



On the other hand, names that earn the majority of their earnings in Canadian dollars but have a high percentage of U.S. costs will suffer in this environment. This may include airlines such as Air Canada, which pays for fuel in U.S. dollars.



An example of a name that would benefit from a falling Canadian dollar would be Toronto-Dominion Bank (TSX:TD)(NYSE:TD). TD had 36% of its revenue come from its U.S. retail segment as well as from its ownership stake in TD Ameritrade in Q1 2016.



TD is also unique among the Canadian banks in that it is well insulated from various negative economic factors that could create pressure on the Canadian dollar, like weak commodity prices or a slowing housing market. TD has some of the lowest exposure to oil and gas loans and Alberta of its peers, and the bank has a low exposure to uninsured mortgages in Ontario and B.C.

[Anonymous]

So our investments will lose value and everything will cost more.

 ac_unsure

[Twenty Dollars]

Seems like I've been inodated with advertising to buy gold, stocks in Canadian mining firms. I don't know anything about gold. I'm a chicken shit when it comes to investing. Making that money was a long hard road. I just can't see investing in hot and cold mutuals, or some other loaded scheme.

[Anonymous]

Seems like I've been inodated with advertising to buy gold, stocks in Canadian mining firms. I don't know anything about gold. I'm a chicken shit when it comes to investing. Making that money was a long hard road. I just can't see investing in hot and cold mutuals, or some other loaded scheme.

Delete them without reading them.

[Twenty Dollars]

Seems like I've been inodated with advertising to buy gold, stocks in Canadian mining firms. I don't know anything about gold. I'm a chicken shit when it comes to investing. Making that money was a long hard road. I just can't see investing in hot and cold mutuals, or some other loaded scheme.

Delete them without reading them.

So buying and owning gold is a bad idea?

[Anonymous]

Seems like I've been inodated with advertising to buy gold, stocks in Canadian mining firms. I don't know anything about gold. I'm a chicken shit when it comes to investing. Making that money was a long hard road. I just can't see investing in hot and cold mutuals, or some other loaded scheme.

Delete them without reading them.

So buying and owning gold is a bad idea?

Taking those scam ads seriously is a waste of time. Full of viruses and malware too.

[Twenty Dollars]

Seems like I've been inodated with advertising to buy gold, stocks in Canadian mining firms. I don't know anything about gold. I'm a chicken shit when it comes to investing. Making that money was a long hard road. I just can't see investing in hot and cold mutuals, or some other loaded scheme.

Delete them without reading them.

So buying and owning gold is a bad idea?

Taking those scam ads seriously is a waste of time. Full of viruses and malware too.

Thank you for the warning

[Anonymous]

Seems like I've been inodated with advertising to buy gold, stocks in Canadian mining firms. I don't know anything about gold. I'm a chicken shit when it comes to investing. Making that money was a long hard road. I just can't see investing in hot and cold mutuals, or some other loaded scheme.

Delete them without reading them.

So buying and owning gold is a bad idea?

Taking those scam ads seriously is a waste of time. Full of viruses and malware too.

I have made the mistake of clicking on them in the past.

[cc]

Say, seoulbro. We have made some recent nice sales for our software (high end engineering stuff, so not cheap) - paid by credit card in US$ over internet, then put into our US$ company account.

Wish to convert to Canadian at optimum time  .. of course an educated  guessing game at best.



Official was at 130+ this morning. We get 1.275 at our bank if I do it via internet and 1.29 if we take out cash and use a moneychanger .. all being a nice bonus for us. But I digress from my question.



We are not in a hurry. I know it is a guessing game, but are there any "vibes out there" that exchange rate could move appreciably in either direction in the near to moderate future?