cctld Dollar dropping again

[hugegrowth]

The Canadian dollar seems to be dropping again vs US dollar, exchange rate around 0.90 today, Paypal using 0.88 today for me. At least it doesn't affect my .ca renewals. Also saw the TSX had a wild ride today, dropping 1200 points in the morning!

 

[lionfish]

It would at first sound counter intuitive that the US dollar surges when the current crisis is centered in the US. But I was informed today that 60% of the world currency reserves, i.e the reserve each country has, is in the USD and 20% is in euro and rest is in other currencies. Hopefully, the canadian dollar would not fall lower. Those .com renewals are now much pricier. We had it almost surreal for a while with the canadian dollar even bypassing the USD for a while. Let's just pray that the canadian dollar will not see the fate of the australian dollar that has tumbled almost 40% in few months with close to 15% drop today (1.26 to the USD on Thursday to 1.42 today)!

 

[DNP]

Yes, the place where I buy/sell - 1.096000 1.116000
The lowest rate for the last 2 years!

 

[draggar]

Don't worry, if the US government gets the $700,000,000,000 from the same place they got the money for additional credit for consumers (just made it "available"), then you can be guaranteed that the value of the US dollar will plummet to al-time lows making what we saw a few months ago nothing.

It will be a good time for foreign entities to come in and buy up out clearance stock.

 

[theinvestor]

Dollar is going to drop as OIL drops. This is a no brainer.

The reason TSX went down so much is because 50% of TSX is made up of commodities which got hammered this morning.

 

[draggar]

Dollar is going to drop as OIL drops. This is a no brainer.

It's the opposite. Since oil is traded in US dollars, the weaker the dollar is the more it costs to buy a barrel of oil (due to exchange rates favoring other currencies).

Now, as the price of oil goes up due to the US dollar going down, the price of oil in other countries, like Canada, will not be as severe since you will also be on the favored side of the currency. Your money is worth more so you'll be able to buy more for the same amount in your own currency (Canadian).

 

[Sonny Banks]

Euro is the king

 

[theinvestor]

The US dollar is stronger as OIL drops. Which makes the Canadian dollar weaker.

What am i missing here?

 

[lionfish]

Euro is the king

Unfortunately, the euro is taking a significant beating and has dropped to 1.34 USD (compare with a high of 1.55 few months ago). The clear winner so far is the Japanese Yen. The biggest loser so far is the australian dollar which is currently on a freefall.

 

[theinvestor]

From a study completed here : http://economics.about.com/od/canada/a/exchange_ooil.htm

they concluded the following information :

I would have guessed the correlation between oil prices and exchange rates for the 2002-2005 period would be around 0.3. This would imply that as oil prices rise so does the value of the Canadian dollar (and vice versa), but there are a lot of other factors that influence the value of the Canadian dollar, so the correlation would be far from perfect. To calculate the correlation in Excel you use the command CORREL(B2:B918,C2:C918), where B2:B918 are the starting and ending points for the oil price data and C2:C918 are the starting and ending points for the Canadian dollar data.

Much to my surprise the correlation between oil prices and exchange rates for this period was not 0.3. It was 0.8477.

The 0.8477 figure is exceptionally high, denoting that there is a very, very strong positive relationship between movements in oil prices and movements in the value of the Canadian dollar.

 

[draggar]

The US dollar is stronger as OIL drops. Which makes the Canadian dollar weaker.

What am i missing here?

The value of the US dollar is irrelevant to the price of oil but the opposite is very true. The value of the US dollar (well, any currency) is loosely based on the amount of their GNP divided by the amount of money that is available (physical money and "credit")

Value = GNP / $available

So, when more money is pumped into the economy (like it was a few months ago) the value will go down especially when the GNP is not going up as fast as the amount of money available being added.

Now, assuming that the Canadian government doesn't do anything to affect the price of the C$, then as the value of the US dollar goes down (due to inflation) then the Canadian dollar will buy more US currency making things in the US seem cheaper (or things priced in US currency).

The price of oil is sold in US dollars so we have 4 things directly affecting the price of oil supply and demand (basic economics) plus the GNP of the US and the amount of money available in US dollars but the affect on the price of oil is the opposite as the value of the dollar - the less the US dollar is worth, the more oil will cost (not the other way around).

Now, since inflation is hitting the value of the US dollar the prices of oil will rise *but* since the value of foreign currency (with few exceptions) will be wort more against the US dollar, the price increase in oil will not be as hard felt in other nations.

For example:

Say, for easy numbers, the US dollar is worth the same as a Canadian dollar and oil is $100 a barrel.

The US government pumps a lot of money into the economy forcing the dollar do drop 25% in value (just for round numbers sake),
$1.25US = $1.00C and a barrel of oil would now cost $125. To convert that into Canadian dollars, just divide $125 / $1.25 = $100C a barrel (this math does NOT take into account OPEC supplies and world demands which is always fluctuating).

So while we're paying 25% more for our oil, our neighbors to the north are paying the same price.

Now, it is extremely possible for OPEC to boost up production, speculators to buy cheaper, or even new sources of oil found that would push the price of oil would drop but the US dollar would not be any stronger without any changes to the above mentioned numbers.

 

[lionfish]

TheInvestor:

The 0.8477 figure is exceptionally high, denoting that there is a very, very strong positive relationship between movements in oil prices and movements in the value of the Canadian dollar.

The reality refutes your statement above : When the oil hit $147 USD, the canadian dollar was 0.98 USD Now oil is $88 USD and CAD is 0.9 Total oil loss: 40% Total canadian dollar loss: 10% What may seem to you as a no-brainer fact that you state with significant certainty, is unfortunately often incorrect. If I were you I would stay away from very strong statements as when these are wrong, they affect your credibility.

 

[theinvestor]

LionFish,

Did i say that is always the case? Correlation is positive. Do you know what that means? Do you want me to belittle you like you do to others?

My point was to draggar that it was not a negative correlation. It almost always moves in the direction of oil. There are other factors which is why it is not a perfect 1.0 correlation.

 

[stuff]

Dollar is going to drop as OIL drops. This is a no brainer.
.

this is totally wrong.
oil drops, dollar up.

 

[Stian]

Oil prices are dropping rapidly, so the Norwegian Krone is at it's weakest vs USD. 1USD is now 6,21 NOK, compared to USDNOK 4,94 a couple of months ago. Not a good time for me to buy domains in other words.

 

[jasdon11]

Oil prices are dropping rapidly, so the Norwegian Krone is at it's weakest vs USD. 1USD is now 6,21 NOK, compared to USDNOK 4,94 a couple of months ago. Not a good time for me to buy domains in other words.

Good time to sell though!

 

[Stian]

Good time to sell though!

Definitely. Most of the domains I have now, I purchased when 1USDNOK was around 5,00.

 

[theinvestor]

Do you guys realize this is .ca thread? and i'm talking about the Canadian dollar in comparison to oil?

 

[lionfish]

TheInvestor:

I was addressing these statements you made:

Dollar is going to drop as OIL drops. This is a no brainer.

and

The 0.8477 figure is exceptionally high, denoting that there is a very, very strong positive relationship between movements in oil prices and movements in the value of the Canadian dollar.

Reading the above, one comes to the conclusion that there is a simple equation here: Anytime oil drops, the canadian dollar drops.

Again things are not that simple. If they were, anyone would be able to predict how a certain currency will do and so become a trillionnaire.

The reality is that there are numerous very complicated factors that determine what happens. My point about the oil price is that oil prices went from less than $90 in February 2008 to more than $145 in July 2008 with canadian dollar almost stable.

Accordingly, if anyone was going to make any investments using your 'no brainer' statement or the 'very very strong correlation' you stated with authority, they will be undoubtedly seriously disappointed.

We are all trying to learn and understand and thus one should stay away from radical statements that 99% of the time will end up simply wrong. Making such statements is in general indicative of lack of experience and reflects poorly on the credibility of the person that makes them.

I am not sure why you were offended or felt belittled. There was never the intention to either offend or belittle you. As stated, we are trying to learn and understand.

 

[theinvestor]

Listen LionFish,

These are not radical statements...go look at past history. I didn't come up with correlations out of no where. There were from studies made, and i pasted them. You can either agree or disagree. You can make your own conclusions. But do your own research before you tell someone else they are wrong.

By the way...the price of OIL rising to $147 was because of threats on supply from Iran. Not everything is going to be directly correlated with the Canadian dollar. Nor did i say it was. I simply stated the facts. It is a strong positive correlation and i will continue to tell you that. Please show me proof otherwise.