December 30, 2007 ~ OTTAWA - Fair-feathered friend to some, foul burden to others, the iconic Canadian bird that took on the world's superpower currencies in 2007 has been picked as the top Canadian news story of the year.
A loonie sits in front of its American counterpart.
THE CANADIAN PRESS/Adrian Wyld
Julian Beltrame, THE CANADIAN PRESS
The soaring loonie had no peer as the year's top story in the annual survey of Canada's broadcasters and newspaper editors conducted by The Canadian Press.
A loonie sits in front of its American counterpart.
THE CANADIAN PRESS/Adrian Wyld |
With 74 of 136 votes cast, the loonie was the clear choice over a wide assortment of headline grabbers that ranged from the RCMP Taser incident (runner-up with 15 votes) to the Robert Pickton trial to climate change and - last year's choice as top story - the war in Afghanistan.
"The Canadian dollar is the best roller coaster ride of the year," said Jim Poling, managing editor of The Hamilton Spectator.
"It is every person's story - from grandma and grandpa's cross-border shopping trips, to importers, farmers and parts manufacturers. There's hardly a Canadian who didn't engage in the flurry over the dollar.""
Not only Canadians were paying attention. Finance Minister Jim Flaherty said the loonie and Canada's economy has also caught the eye of his global counterparts."
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"People are paying attention to Canada because of our strong economic fundamentals and the loonie to a certain extent reflects the strength of those economic fundamentals," he said.
"It's good news overall as long as the currency is reflecting the economic fundamentals. When we had some significant speculation in the currency that distorted the market, that was not good."
"And it didn't escape the notice of American late-night talk shows, which presented the loonie's challenge of the mighty U.S. dollar as bewildering and humiliating."
The faux-news show, The Daily Show, featured deadpan comedian John Hodgman asking host Jon Stewart what cruel deity would could have permitted the U.S. dollar to be equal to the Canadian loonie.
Six years ago, the joke was on the loonie. On Jan. 21, 2002, the currency bottomed out at 61.79 cents US, its lowest ebb in history, and the punch lines revolved around the "northern peso".
"From there it had nowhere to go but up."
But few would have predicted when the year began that it would be among the top-performing world currencies, and that it would not only storm the parity wall but send it crashing along with the myth of the greenback's preeminence in the world.
One of Canada's top economists, TD Bank's Don Drummond, recalls sheepishly a bold prediction that the currency would finish 2007 strongly at 90 cents US when he was asked to write on the dollar's prospects for the Canadian Manufacturers and Exporters' magazine last winter.
"I tried to get them to retract all the copies of the 2006 edition so that no one could check it, but they didn't think it was practical," joked Drummond.
The forecast appeared reasonable, even rosy, at the beginning of January, when the loonie stood around 86 cents US, looking comfortable at that altitude for several months before making a move to the 90-cent level in April.
Except for hitting a brief air pocket during the subprime meltdown in August, the loonie just kept climbing, despite the best efforts of Flaherty and Bank of Canada governor David Dodge to talk it down.
It reached parity for the first time in 31 years on Sept. 20 and rocketed to above 110 cents US on Nov. 7 - a modern-era record - before settling down back to around parity.
Along the way, it caused much gnashing of teeth among Canada's manufacturers and foresters, who found their products both in less demand and less valuable.
It caused a backlash among Canadian shoppers who griped that prices in stores hadn't dropped sufficiently.
And it was the bird that launched tens of thousands of autos for the border.
In October alone, there were 2.2 million same-day car trips across the border, about 120,000 more than in October 2006.
"It absolutely hammered a lot of people, but it sure benefited a lot of people too," noted Drummond.
"If you wanted to go on a trip, if you wanted to buy a nice little place in Florida, if you were a business conducting imports you got a heck of a price break. And it kept inflation down and that helped keep interest rates down, and that has benefited a lot of people."
"Among those that saw a direct gain were professional hockey, baseball and basketball franchises - such as the Toronto Blue Jays and Edmonton Oilers - who paid their players in cheaper U.S. greenbacks and collected gate receipts in suddenly valuable loonies."
But the loonie is a coin and, as such, it has two sides. The other side is that Canada's manufacturing heartland - Ontario and Quebec - was hammered by the flip side of the equation. With not all figures in, manufacturers shed 100,000 jobs and the forestry sector about 8,000 as plants and mills downsized, slowed operations or just went under.
The forestry sector might have taken the biggest punch, says Avrim Lazar of the Forest Products Association of Canada, because all the inputs in production, from the lumber, to transportation, to energy costs, were in Canadian dollars and the vast majority of the revenues were in U.S. dollars.
"Canada makes its living selling stuff to the United States and having your currency appreciate by huge amounts relative to your biggest customer basically means you are going to sell less and make less money," he said.
"Rarely has a currency been so well named. It is loony and you just don't know what it will do next."
"Predicting what the loonie will do next is a mug's game, as many have discovered. Estimates for next year range from 90 cents US to above $1.10 US, this latter forecast from currency analyst Dennis Gartman of Virginia, who has been bullish on the Canadian currency since 2002."
Drummond said the trick to deciding how high or low the Canadian dollar will fly is as simple as deciding what will happen to the prices for commodities such as oil, gold and minerals.
"If you can predict commodity prices, you can come pretty close to the dollar," he said. "Since 2002, the dollar has not deviated very much from commodity prices."
Some facts about the rise of the Canadian dollar, which was picked in the annual survey by The Canadian Press as Canada's top News Story for 2007:
Jan. 1: Started trading at US$85.81
Parity: Closed above parity Sept. 28 at 100.52 cents US.
Record high: Nov. 7 traded above 110.24 cents US on higher oil prices. Modern day high.
Current rate: With one day left in the year, the dollar sits at 101.99 cents US.
Trend: From Jan. 1 to the record November high, the loonie rose more than 24 per cent, among the best-performing currencies in the world.
Record low: 61.79 cents US on Jan. 21, 2002.
Why latest rise? High energy prices and Canada's strong economy helped attract investments in Canadian stocks and bonds. Weakness in the U.S. dollar also helped the loonie.
Other: Higher interest rates in Canada than in the U.S. also kept demand high for the loonie, as did demand for Canadian dollars to finance multibillion-dollar corporate acquisitions of Alcan and other Canadian companies.
Impact: Loonie's rise helped lower prices for trips south of the border, as well as imports of fruits and vegetables and industrial machinery from the U.S. But it battered Canada's export sector, especially lumber producers.
Quote: "If you wanted to go on a trip, if you wanted to buy a nice little place in Florida, if you were a business conducting imports you got a heck of a price break. And it kept inflation down and that helped keep interest rates down, and that has benefited a lot of people." - Don Drummond, chief economist at TD Bank.
Some quotes from voters who took part in The Canadian Press survey that chose the rise in the Canadian dollar as Canada's top news story for 2007:
"The loonie's looney flight affected everyone." Scott Metcalfe, news director, 680News Toronto
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"The Canadian dollar is the best roller coaster ride of the year. It is every person's story - from grandma and grandpa's cross-border shopping trips to importers, farmers and parts manufacturers that powers so much of the Canadian economy. There's hardly a Canadian who didn't engage in the flurry over the dollar." Jim Poling, managing editor, news, Hamilton Spectator
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"Its effects are still being felt and debated. An export rich economy feeling the pinch while Canadians finally feel they're getting value for their dollar with new purchasing power. The real story will be how this will equalize." Sheldon MacLeod, news director, CKBW Bridgewater, N.S.
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"It's not the prompting of the cross-border shopping blitz that is the story. It's the cause and effect of the downfall that has happened in the forestry sector from Corner Brook to British Columbia." Chris Green, news supervisor, CFCB Corner Brook, N.L.
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"The value of the dollar affects not only the way Canadians feel about their country, but it has a material impact on every person in the country. Beyond the obvious implications for consumers and retailers, a rising dollar presents new challenges to the country's industrial heartland and to the booming resource sector, where it in effect cuts the price they receive for commodities that are priced in U.S. dollars." Barry Raison, editor, Brockville Recorder and Times
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"Not since the Diefenbuck have we seen such a juxtaposition of grief and euphoria over the strength of our dollar." Fred Rinne, managing editor, Grande Prairie Daily Herald-Tribune
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"The strength of the dollar underscored reasons for Canadians to feel positive about their economy, even though it may have actually said more about the U.S. economy. But it also highlighted the growing gap between the strong western resource-based economies and concern for the manufacturing sector in the east." Murray Wood, provincial news director, News Talk 980 Regina/650 Saskatoon...