I just want to point out that today, while most currencies are weakening against the dollar (or shored up in the yen’s case), the Canadian dollar is ripping against us.
Why?
It has absolutely nothing to do with politics or budgets (although Canada’s national budget is arguably much better than ours). The real reason, I think, is that price of oil is higher again.
The initial surge of the dollar against the Canadian dollar was something I had noticed (and mocked) a few weeks back. But even then, I had noted that it occurred during a major plunge in the prices of crude. One observation does not confirm a model, but now we have crude oil back above $90 a barrel, and the Canadian dollar is once more resuming its power run.
This sort of makes sense, as I know the Canadian government gets a huge kickback from their natural resources, which obviously generate much larger profits during commodity booms.
However, this is notable as I am presently predicting a commodity bust.
I just wanted to point the relationship out. If you’re looking for a way to bet against crude oil without getting directly into the mess, one potential way to do so would be to short the Canadian dollar or sell options to give you the right to cash in Canadian dollars for American dollars at these levels. Or you could just load up on Canadian dollars when crude oil is running strong then convert them back when crude oil craps out.
There’s a couple of options there, all of which will be much less volatile than playing directly in the crude market (let me tell you).
Norway’s currency (is that krona’s or franc’s?) is probably acting similarly.
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Lutefisk, I believe.
The Norwegian lutefisks?
It’s the krone.
Lutefisk is the national food of Norway (sort of), a nasty mix of dried whitefisk and lye. Smells and tastes like soap
Ahh, you out cultured me.
Well done.
Yes, as a Canadian invested primarily in the US, our strong dollar has been a killer. In hindsight I should have hedged it, but frankly even my worst case scenario failed to capture the reversal in the two currencies that has occurred. So I for one would welcome a commodity bubble pop that drops our $. But I don’t see it coming in the short term.
CT – you’ve got it. The Loonie has been a petro-currency for about 4 years. Instead of swimming around in a pristine northern lake on the back of the $C coin, that bird should be bobbing in a Ft. Mac tailings pond.
Yes absolutely. In fact, I thought many people knew this, but noticed that the focus is on the yen and/or euro. Any global growth stimulus plan will require energy. It’s been how I’ve decided my summer vacations: oil goes up, I go south for the summer and get a nice discount on my holiday spending.
Every immigrant to Vancouver monitors this little piece of arbitrage daily. It helps keep them well supplied in cheese and other dairy products.
How do you play it?