The Hemisphere: Dollar’s Dip

Canadians tend to regard the fluctuations of their dollar with a mixture of national pride and realistic concern. When it is at a premium in terms of U.S. funds—as it has been for 3½ years—hotelmen and other businessmen are entitled to collect extra pennies in exchange for U.S. currency, importers can happily use their own valuable dollars for purchases abroad. But the premium is less pleasing to exporters, who must sell their products for U.S. funds but pay their production costs in dearer Canadian dollars. Last week it was the exporters’ turn for mild satisfaction: the Canadian dollar slipped on the New York market to 100.5 U.S. cents, its lowest level since June 1953.

Ottawa economists attributed the dollar’s drop in part to the fact that foreign investors, mainly in the U.S., have been selling Canadian securities to seek higher returns elsewhere. New investment from the U.S. and abroad—the big prop under the Canadian dollar in recent years—also tapered off, and Canada’s adverse balance of trade was having its downward effect. The Bank of Canada last week announced an increase in its interest rate on loans to banks, from 2% to 2¼%. The change, mildly deflationary in its effect, may tend to boost the Canadian dollar again, or at least put the brakes on its slide.