Canadian Dollar in Freefall With AM-Dollar-Gold
MONTREAL (AP) _ The Canadian dollar ended a turbulent week on foreign exchange markets Friday by slumping to a record low of 71.79 cents U.S. before recovering to close at 72.00.
The dollar, which closed Thursday at 72.82 cents U.S., lost more than 21/2 cents this week against the powerful American dollar, a freefall a trader at Royal Bank of Canada said was the Canadian dollar’s worst ever.
The American dollar, which continued to batter most major currencies Friday, is expected to continue increasing in value because of President Reagan’s refusal to take action that would slow the rise of the U.S. dollar.
The American dollar soared Friday to new record highs against the pound sterling, French franc and Italian lira. It also set a 13-year high against the West German mark and the Dutch guilder and a 10-year high against the Swiss franc.
Canadians now have to fork out more than $1.40, commissions included, to buy one U.S. dollar.
Some analysts are predicting that figure will rise.
Jim Snook, assistant vice-president at Citibank in Toronto, predicted last month the dollar would fall to 70 cents U.S. - but not this fast.
″It shouldn’t be worth more than 70 cents anyway,″ Snook said Friday. ″Our economy just isn’t growing. There’s no consumer spending here.
″People are saving for a rainy day.″
Daniel Poisson, senior foreign exchange trader at the National Bank of Canada, said he believes the Canadian dollar will slip even further if the U.S. dollar breaks through the psychological barrier of 3.40 West German marks.
The U.S. dollar closed Friday at 3.3960 marks in New York.
One major reason traders believe the Canadian dollar will continue to drop is the arrival of March, usually a weak month for the currency as Canadian companies buy U.S. dollars to send interest and dividend payments to their parent companies in the United States.
With the slumping dollar spelling bad news for Canadian importers who get their goods from the United States, some importers are looking to alternative countries.
Murray Smith, senior policy analyst at the C.D. Howe Institute in Toronto, said an example of this is the increased volume of oranges now being imported into Canada from Brazil.
″With the winter freeze in Florida and the strong U.S. dollar, Canada is turning to Brazil,″ said Smith.
While Canadians may be immune from higher prices for oranges, they will suffer from rising interest rates.
All of Canada’s chartered banks upped their prime rate to 11.5 percent Thursday. And Canadian Imperial Bank of Commerce increased its mortgage rates Friday by between one-quarter and three-quarters of a percentage point.
A one-year mortgage rate at the Imperial Bank now costs 11.25 percent, a two-year 11.75 percent, a three-year 12.5 percent, a four-year 13 percent and a five-year 13.25 percent.
Some Canadian travellers are protecting themselves against more drops in the the dollar.
Jane Pizzo, vice-president of operations for currency dealers Deak Perera Canada Inc., said she has noticed a significant increase in people buying dollars now for their trip southward even though the holidays are scheduled for the summer.
Canadian travelers who are discouraged by the dollar’s tumble will find the currency goes much further in Europe.
Despite its heavy losses this week against its U.S. counterpart, Canada’s dollar rose to 2.4467 marks from 2.4305 last Friday, to 1,518 lire from 1,505 and to 7.4765 French francs from 7.4479 over the same period.