BNP sees loonie becoming 'reserve currency'

[jesseps]

Canadian monetary and fiscal policy “continues to suggest the making of a reserve currency,” making it less likely that international investors will sell the nation’s assets during economic shocks, BNP Paribas SA said.

 

Global demand for commodities will “force the Bank of Canada to tighten faster than the market is currently pricing in,” BNP analysts wrote in an e-mailed note. “The end benefit for Canada is the rising credibility of the central bank as it correctly anticipated the subprime crisis and presided over a stable banking system. The Harper government is also moving ahead with the removal of emergency G-20 crisis measures.”

 

BNP recommended selling the euro against the Canadian dollar. BNP predicts the loonie will appreciate to C$1.20 per euro from its current level of about C$1.25 as the European Central Bank is forced to keep rates low.

 

Central banks and “real money” will buy Canadian securities during “sharp corrections” in the loonie, as foreign investors are now “heavily” invested in the nation’s fixed-income assets, BNP said. That compares with a bias towards owning Canadian equities before the subprime crisis, they wrote.

 

(Courtesy of Bloomberg via. Financial Post)

 

:goodvibes:

[Malek]

Every rate hike will catapult the dollar to higher summits, i can't imagine how far the dollar will go against the greenbacks and euro.

 

German cars for everyone! lol

[jesseps]

While were at it. We should finally annex Turks & Caicos. Its finally time Canada has a real home in the South. I wonder if the snow birds would leave Florida for somewhere way more tropical.

[MTLskyline]

I don't know, it would cost a lot more money than most people realize to "Canadianize" Turks and Caicos.

[ToxiK]

I don't know, it would cost a lot more money than most people realize to "Canadianize" Turks and Caicos.

 

Maybe, but on the other hand, imagin how much of the money that is actually spend in Florida, Cuba or other countries would stay in "Canada" (meaning Canada with the Turks and Caicos). I suppose employes and resorts would pay taxes to the canadian government. Canadian companies would have access to that market. It is something we should seriously think about.

[Habsfan]

Maybe, but on the other hand, imagin how much of the money that is actually spend in Florida, Cuba or other countries would stay in "Canada" (meaning Canada with the Turks and Caicos). I suppose employes and resorts would pay taxes to the canadian government. Canadian companies would have access to that market. It is something we should seriously think about.

 

You'd be surprised to find out how many snowbirds drive down to florida...which is something they couldn't do with Turcs and Caicos!

[ToxiK]

You'd be surprised to find out how many snowbirds drive down to florida...which is something they couldn't do with Turcs and Caicos!

 

They could take a boat from there. But even if those snowbirds prefer Florida, a lot of people might prefer the "Canadian" Turks and Caicos over Cuba, the Dominican Republic or Mexico.

[cjb]

Russia to Buy Canadian, Aussie Dollars for First Time

 

June 16 (Bloomberg)

 

Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. dollar and euro.

 

“Adding the Australian dollar is being discussed,” Alexei Ulyukayev, the central bank’s first deputy chairman, said in an interview at an event hosted by Bloomberg in Moscow last night. “There are pros and cons. We have added the Canadian dollar but haven’t yet begun operations” with the currency.

 

U.S. dollars account for 47 percent of Russia’s reserves, while euros make up 41 percent, British pounds 10 percent and Japanese yen 2 percent, Ulyukyaev said in November. The central bank has reduced dollars from 50 percent in 2006, when euros accounted for 40 percent and the remaining 10 percent was in yen and pounds. Russia’s international reserves, the world’s third biggest, reached $458.2 billion on June 4.

 

President Dmitry Medvedev last year suggested Russia would reduce its use of the U.S. dollar as a reserve currency after the greenback lost 34 percent of its value against the euro in 2 ½ years. The euro fell to a four-year low of $1.1877 on June 7 and has dropped 22 percent since Nov. 25 on investor concern policy makers may fail to contain Europe’s debt crisis.

 

Push to Diversify

 

Russia’s push to diversify reserves “is more a result of their desire to do something in response to the extreme volatility of the dollar and the euro,” said Elena Matrosova, a Moscow-based economist at BDO International, the financial consultancy that lists the central bank among its clients. The Canadian or Australian dollar “can’t be truly called international reserve currencies because of their very limited liquidity,” she said.

 

The Australian dollar traded near the strongest level since mid-May, at 86.43 U.S. cents as of 6:40 a.m. in London.

 

The Canadian and Australian dollars have been among the best performers in the past 12 months as investors speculated a recovering global economy would increase demand for the countries’ raw materials. The Canadian dollar has gained 10 percent against the U.S. currency and 23 percent versus the euro during that period. The Australian dollar is up 8.6 percent and 21 percent, respectively.

 

Ruble Gains

 

Medvedev has pushed for the creation of regional reserve currencies and in July produced a prototype coin for a “world currency,” which he said was needed to stabilize the global economy.

 

Central Bank Chairman Sergey Ignatiev said May 27 that Russia hadn’t changed the currency structure of its reserves after year-end figures showed Bank Rossii increased the portion held in dollars.

 

The U.S. dollar may account for more than half of Russia’s foreign currency reserves by the end of this year, Paris-based BNP Paribas estimated last month.

 

The ruble has gained almost 11 percent against the euro and 0.2 percent versus the dollar in the past 12 months. The Russian currency strengthened for a fifth day against the greenback, climbing 0.7 percent to 31.1450 for its longest winning streak in two months.

 

Russia had a net capital inflow of about $3 billion in May after an inflow of between $3 billion and $4 billion in the previous month, said Ulyukayev.

 

“There was a small capital inflow of about $3 billion in May, according to preliminary calculations,” he said.

 

The Russian government forecasts no net capital inflow this year after outflows of $52.4 billion in 2009.

 

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

 

Last Updated: June 16, 2010 02:58 EDT

[cjb]

Je ne crois pas que le dollar canadien ne devienne jamais une monnaie de réserve.

 

Les liquidités canadiennes sont minimes en comparaison avec le dollar US ou l'Euro.

 

Ça peut être une bonne option de diversification ( 3-5% du portefeuille) mais il y a un manque de profondeur pour permettre à un pays d'en accumuler plus.

[jesseps]

They could take a boat from there. But even if those snowbirds prefer Florida, a lot of people might prefer the "Canadian" Turks and Caicos over Cuba, the Dominican Republic or Mexico.

 

Hell I would. We constantly hear about Quebeckers getting whacked in Mexico and now in the Dominican.

 

Time for Canada to have a piece of paradise. I just can only imagine how much Westjet and Air Canada would charge for this flight