How about that dollar? It has taken wing. It is up about a half-cent today (93.17 cents US) on hints from the BoC that it will be raising the rate to keep inflation in check. We keep hitting new 30 year highs. The last time our dollar was this high, Talking Heads had just released their first album, and Stevie Wonder was "it" (I wonder how many that are buying condo's have heard of either). We were also moving into recession.
I think that the timing is pretty safe - the economy is over-heating, house prices are, um, nuts, lumber is already in the toilet, and other economies are slowing down - which will mean less demand for commodities in general. Oil fell 2.8% today as well. It has to happen sooner or later.
The Canadian dollar is at a 15 year high against the Yen, a 6 month high against the euro and is showing strength against the most traded currencies. The big banks raised mortgage rates 0.3% today as well.
What does it mean? I think that we will see housing inventory surge, sales slow markedly, increasing unemployment, less commodity sales, less tourism, and hopefully - a return to some semblance of sanity.
This excerpt from Bloomberg
Canada's Dollar Reaches 30-Year High on Hint of Rate Increase
By Kim-Mai Cutler and Haris Anwar
May 29 (Bloomberg) -- The Canadian dollar rose to a 30-year high after the central bank said it may raise borrowing costs to restrain inflation. Short-term government bond yields surged.
The Bank of Canada suggested it may raise overnight rates in the ``near term'' to curtail inflation, though it held the benchmark lending rate at 4.25 percent for an eighth meeting. It last raised borrowing costs 0.25 percentage point in May 2006. Benchmark two-year bond yields climbed the most in almost 23 months to 4.58 percent, the highest since March 2002.
``This is more hawkish than what the market was expecting,'' said Marc Levesque, chief North American strategist at TD Securities in Toronto. ``The Bank of Canada is squarely telling the market that it's going to hike and the Canadian dollar has clearly gotten a kick off the back of that.''
The central bank, departing from earlier statements describing inflation risks as balanced, said there is an ``increased risk'' that inflation will persist above the 2 percent target. The statement added that ``some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.''
Ten of 15 economists surveyed today by Bloomberg predict the central bank will raise rates at its next meeting, July 10. Last week, two of 19 forecast such an increase. (Gee, psychology can turn pretty fast...)