In international money markets, there has been a run on the dollar in recent weeks.
As a direct result of interest rate cuts by the Bank of Canada in early November, the dollar lost three-quarters of a cent against the American dollar over two weeks.
To listen to Central Canadian economists, you’d think the sky was falling. Even the way they talk about it shows their bias. They bemoan the effects of a “weak” dollar.
They look forward to the moment it begins to “strengthen” again.
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“The Canadian dollar has had a great run so I’m not surprised that it would take a pause and I can see it strengthening again,” said Toronto-Dominion Bank chief economist Ruth Getter.
She made that sound like a good thing.
Do not try to tell that to Ted Haney of the Canadian Beef Exporters Association, nor to Jim Morris of Canada Pork International.
Like other food export agencies, the Canadian Wheat Board among them, a “weaker” dollar usually means stronger sales.
Last week, as he often does, Haney boarded an airplane in Calgary and flew to Japan and other Asian destinations to promote sales of Canadian beef.
The “weaker” the dollar, the less Canadian beef costs in export markets which usually pay in American dollars, and the more competitive it is.
Morris, who works by day for the Saskatchewan hog marketing board and also serves as president of the industry’s national export arm, says the benefits to exporters of a devalued dollar are almost immediate.
Last week, with a U.S. price of $56 per hundredweight, an average hog being sold south of the border was worth close to $129 (U.S.), about $174 Canadian.
A one-cent devaluation in the Canadian dollar against the American dollar would add more than $2 to the value of that animal, once the U.S. payment is converted to Canadian currency.
It also could be a margin of profit that would allow the seller to lower the asking price, making the Canadian hog more competitive in the U.S. market.
“As an exporter, if each pig is worth $2 more because of currency fluctuation, I’m happy,” Morris said from Saskatoon.
In other words, the economists who see a stronger Canadian currency as a sure sign of good economic health and a source of national pride speak for the Central Canadian perspective.
Out in the resource-exporting regions, a lower dollar is good news rather than the stuff of hand-wringing worry.
Bank of Canada governor Gordon Thiessen would know this.
Thiessen hails from Saskatchewan originally and while firmly planted during recent decades amidst proponents of the Central Canadian mindset, he cannot have forgotten his roots in the resource-producing hinterland.
Part of Thiessen’s job as bank governor is to watch the balance between currency values and interest rates.
He sensibly argues that the goal of monetary policy is to guard against currency instability, rather than to satisfy economists who yearn for a strong dollar.
The hinterland can live with that.
