Loonie Must Fall

This note from the FT’s View of the day is worth reading.

View of the Day: Canadian dollar devaluation

By Carl Weinberg

Published: February 20 2008 14:36 | Last updated: February 20 2008 14:36

The Canadian dollar must be devalued, and quickly, says Carl Weinberg, chief economist at High Frequency Economics.

He points out that the currency has been pushed to record highs on the basis of anticipated oil revenues. However, he says, the windfall on oil exports – which are priced in US dollars, and thus decline in local currency terms as the “loonie” appreciates – must eventually be offset by losses on exports of manufactured goods and services.

“Those losses now exceed the windfall from oil exports, as last week’s report on Canada’s trade balance demonstrates very clearly,” Mr Weinberg says.

Click on title for full article

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