Friday, September 28, 2007

We're more than even!

By Michael J.W. Stickings

The Canadian dollar briefly reached parity with the American dollar last week, before pulling back slightly. But today -- well, it feels awfully good:
The Canadian dollar has closed above parity with U.S. dollar for first time since November, 1976, closing up two-thirds of a cent at $1.0052 (U.S.).

The Canadian dollar vaulted back above parity early Friday and held on to its gains throughout the afternoon as commodity prices rallied and the U.S. currency continued to struggle.

The Canadian currency reached parity with its U.S. counterpart for the first time in 31 years on Sept. 20. Since then, it has risen above par during intraday trading a number of times but has failed to close above that level.

The generally weak American dollar has helped, of course, but another reason for the rise of the loonie (the nickname of our dollar) is oil: "'Among the G-10 nation currencies, the Canadian dollar is used more than any other as a proxy for oil,' Rebecca Paterson, global currency strategist at J.P. Morgan in New York, said in an interview. 'So when oil prices rise, anyone that wants to bet on oil and does not want to play the commodity market turns to the Canadian dollar.'" With the price of oil on the rise, almost reaching its record high today, the dollar has become a currency of choice for investors.

Why does it feel so good? Because, to some extent, national (and personal, insofar as the national is personal) self-identity is connected to the value of one's currency. If your currency is strong, you generally feel good about your country. It makes no sense, given the intricacies and inanities of the international currency market, but buying power matters -- the understanding that x amount of your currency buys y amount of another. It may not matter all that much whether the Canadian dollar is worth 70 U.S. cents, or 90, or a full dollar, or, as is currently the case, a tiny bit more than a full dollar. What does such "value," or worth, even mean?

And yet, it wasn't so long ago that the relative strength of the U.S. dollar and the relative weakness of the Canadian dollar -- relative to each other, that is -- seemed to put us at some sort of disadvantage. We could travel to the U.S. and our dollar just wouldn't buy all that much, or so it seemed. Our dollar was a joke, or so it seemed -- so we were told, regardless of whether or not it was true. That 10-dollar U.S. book cost a few more, seemingly many more, Canadian dollars, and, meanwhile, Americans could travel up here and spend their money with seemingly reckless abandon, so strong was their currency relative to ours. And this hurt our professional sports teams, and particularly the hockey teams we care so much about, all of them having to pay out salaries in U.S. dollars while taking in Canadian dollars. Those teams needed help, and got it, and it was necessary -- and embarrassing. And we sensed, with such a "weak" dollar, that Americans were laughing at us.

But not now. Now our sports teams seemingly have more money to spend. Now that 10-dollar U.S. book costs, well, about 10 dollars Canadian. The fact this this is bad for our tourism and export industries seems to matter less -- at least for now, at least to those not involved in those industries -- than the new found strength, the rising "value," of our currency. Laugh at us if you will, but our dollar stands firm tonight.

The loonie has gone up, and, with it, so has our pride, our sense of national self-worth. There is more to this great country than the fluctuating "value" of its currency, its "value" relative to the American currency, but, for now, for the first time in 31 years, it's nice to be more than even with our superpower friends to the south.

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