Friday, September 21, 2007

Dollar takes a trip to the loonie bin

The money market can be crazy at times, but this week, the U.S. dollar officially took a trip to the loonie bin.

For the first time in more than 30 years, the American dollar dipped in world markets to trade at par and even slightly below the Canadian dollar.

I grew up in Canada, and the last time the dollars were equal was in 1976.

For most of 2007, the Canadian and U.S. dollars have been close, with the loonie – named after the loon depicted on the Canadian $1 coin – valued at or greater than 95 cents U.S.

What this means for trade is that imports and exports between the two countries are trading equally, whereas before, someone paid extra or less depending on the direction of trade.

Just five years ago, in 2002, one Canadian dollar could purchase a mere 61 cents U.S., while a U.S. dollar had the purchasing power of $1.39 in Canada – the largest gap ever between the two currencies.

Analysts say high oil prices around the world, along with a strengthening Euro in Europe, have contributed with the U.S. dollar backing up to the same level as its surging Canadian counterpart.

Many countries that invest in oil are now using Euros instead of U.S. dollars because the Euro was recently valued at $1.40 U.S.

So, no matter how many loonies are involved, I’m just happy that we have equal opportunity.