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The Legendary Loonie

Big Loonie

Loonie has some room to fall

True value is less than 90 cents US, report says
The Canadian Press

Ottawa – Canada’s loonie may have slid well below parity during the past few months, but it has room to fall before reaching its true value at under 90 cents US, according to a new measure on global currencies.

The latest World Price Index report issued Tuesday by London based World Economics says the loonie remains about 10 per cent overvalued despite a recent dip that has taken it from parity to 96 cents US.

That would mean the true value of the Canadian currency is under 88 cents US, lower than what many Canadian analysts calculate as the underlying value of the loonie.

But that doesn’t mean markets will react to the measure right away or even in the next few months, says Bank of Montreal chief economist Doug Porter, who believes the loonie’s underlying value may be just north of 90 cents US.

World Economics calculates the relative value of currencies by measuring relative purchasing power and excludes temporary factors that tend to influence traders.

– October 17th Kitchener Record

Tyler Brown
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tylerb@riskman.ca
(519) 212-9859
@tbrown_101

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