CANADA: Free Dollar

During September, nearly $300 million in U.S. cash moved across the border for investment in Canada. Much of it was smart money from speculators who thought they saw a sure thing. Canada’s trade was brisk, her U.S. dollar reserves mounting to a record high. The Canadian dollar was obviously worth more than its quoted price of 90¢ U.S., and revaluation seemed certain. If it should be hiked to its old par value of 100 U.S. cents, an investor would stand to reap a quick 10% profit.

Last week the Canadian government upset the dope. Finance Minister Douglas Abbott, a plugger for free enterprise, managed to convince the cabinet that Canada should try the free-dollar theory, to unpeg her dollar altogether and let the price fluctuate according to the demand for Canadian funds.

For the foreign-exchange speculators, the decision for a free dollar was a temporary setback. If they rushed in to convert their money back to U.S. cash, the Canadian dollar might fall below 90¢ and they would take a loss. Their best bet now was to sit tight and wait for the Canadian dollar to show what it could do. This week, a few hours after trading opened, it was selling at 94½¢ in New York, 95¢ in Montreal and 96½¢ in London.