James Baxter
The Ottawa Citizen
The U.S. dollar continued its long-anticipated swoon yesterday, pushing the Canadian dollar to its highest close since mid-2002.
Buoyed by stronger-than-expected economic results over the past week and pessimistic forecasts with regard to the effectiveness of President George W. Bush's economic stimulus package, the dollar again gained more ground on its U.S. counterpart, closing at 65.16 cents U.S., up .09 cents from Wednesday.
The Canadian dollar fared less well against the euro, falling 0.007 basis points to 0.6137 euros, an indication that the dollar's performance has more to do with mixed economic signals in the U.S. than anything is happening in Canada, economists said.
The gains against the U.S. currency, while modest, signal that investors see a bleak future for that economy over the short to medium term and are seeking other safe havens.
"I believe the (U.S.) dollar will weaken in 2003-04 and that the large fiscal stimulus package just announced by President Bush will precipitate a decline in the currency," Stephen Jen, a leading currency analyst with Wall Street powerhouse Morgan Stanley, said in a report released yesterday. "I do not share the view that such stimulus is good for stocks and therefore good for the dollar. The key here is that, in contrast to the early 1980s, the U.S. is embarking on what looks likely to be a protracted period of massive fiscal stimulus at a time when the current-account deficit is already breaching critical levels."
Mr. Jen said the U.S. dollar is overpriced -- by as much as 15 per cent and that with economic growth forecast to be quite modest, a correction of nearly 20 per cent will be needed.
Stephen Poloz, vice-president and chief economist for Export Development Canada, said the imbalance is far more pronounced between the U.S. dollar and its European and Asian counterparts and that the Canadian dollar is likely to recover to somewhere near 70 cents U.S. by mid-2004.
The Ottawa Citizen
The U.S. dollar continued its long-anticipated swoon yesterday, pushing the Canadian dollar to its highest close since mid-2002.
Buoyed by stronger-than-expected economic results over the past week and pessimistic forecasts with regard to the effectiveness of President George W. Bush's economic stimulus package, the dollar again gained more ground on its U.S. counterpart, closing at 65.16 cents U.S., up .09 cents from Wednesday.
The Canadian dollar fared less well against the euro, falling 0.007 basis points to 0.6137 euros, an indication that the dollar's performance has more to do with mixed economic signals in the U.S. than anything is happening in Canada, economists said.
The gains against the U.S. currency, while modest, signal that investors see a bleak future for that economy over the short to medium term and are seeking other safe havens.
"I believe the (U.S.) dollar will weaken in 2003-04 and that the large fiscal stimulus package just announced by President Bush will precipitate a decline in the currency," Stephen Jen, a leading currency analyst with Wall Street powerhouse Morgan Stanley, said in a report released yesterday. "I do not share the view that such stimulus is good for stocks and therefore good for the dollar. The key here is that, in contrast to the early 1980s, the U.S. is embarking on what looks likely to be a protracted period of massive fiscal stimulus at a time when the current-account deficit is already breaching critical levels."
Mr. Jen said the U.S. dollar is overpriced -- by as much as 15 per cent and that with economic growth forecast to be quite modest, a correction of nearly 20 per cent will be needed.
Stephen Poloz, vice-president and chief economist for Export Development Canada, said the imbalance is far more pronounced between the U.S. dollar and its European and Asian counterparts and that the Canadian dollar is likely to recover to somewhere near 70 cents U.S. by mid-2004.
