CIBC World Markets Predicts 93 Cent Dollar

From CTV News:

CIBC World Markets expects the Canadian dollar to sink to about 93 cents (U.S.) this winter.

I decided to see what CIBC World Markets were predicting for the price of oil this winter.  I couldn't find a winter prediction, but did find their prediction for 2011 of $75.

Plug $75 into MERT and you get a Canadian dollar in the 94.5-96 cent range, depending on what you assume will happen to interest rates.  So their very complex model is yielding similar results to my toy, if you assume oil will be around (or slightly above) $75.

Comments

[Just visiting from Macleans]

Hey MM. Just a few days ago, you linked to this column in Economics Lab:

Get ready for a $1.15 loonie
Patricia Croft is the former chief economist for RBC Global Asset Management

Exporters beware: Over the next 12 months, get ready for a Canadian dollar at $1.15 against the U.S. greenback -- or higher.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/the-economists/get-ready-for-a-115-loonie/article1745200/

Is it any surprise, therefore, that Caplan "indulges"?

[brendon]

I read this as CIBC trying to get a headline - they are an outlier. Most analysts see the loonie at/above parity for all of 2011.

[Mike Moffatt]

JvfM: It's a fair point. I don't take economic forecasts/predictions too seriously - I was more interested to see if their oil price prediction and CDN/US prediction were in line, which they are.

As an aside, I'd highly recommend Dan Gardner's 'Future Babble' RE: expert predictions.

[Just visiting from Macleans]

Kenneth Rogoff, economics Harvard, was pretty strong on suggesting economists don't do forecasts, and /or shouldn't in an TVO Agenda debate I posted a couple of times before - The Limits of Economics .

http://www.tvo.org/cfmx/tvoorg/theagenda/index.cfm?page_id=7&bpn=779686&ts=2010-01-06%2020:00:00.0

Re: Future Babble - yes, I've seen some internet buzz on that. (Btw, I've noticed Caplan seems to have a permanent scowl on his face on political panels I've seen him on recently.)

[Mike Moffatt]

Rogoff has a point. I'd defend my profession here by saying it's largely MBAs doing forecasting, not economists. Of course, since I teach MBAs (and HBAs) that doesn't really help my case any.

[Just visiting from Macleans]

http://tinyurl.com/24lklmb

:)

[Just visiting from Macleans]

I'd defend my profession here by saying it's largely MBAs doing forecasting, not economists. Of course, since I teach MBAs (and HBAs) that doesn't really help my case any.

Somewhat related. I see SG's doing a G&M online discussion Thurs. about foreign investment etc. What caught my eye also in today's Economy Lab was a column by Leonard Waverman, Dean of the Haskayne School of Business, University of Calgary, a competitor school, of sorts, also an economist.

On the Potash Corp takeover, he writes:

Potash Corp. has neither capital shortage nor any skills gap. BHP suggests that they will market better – not much of an advantage for a key input such as potash, whose demand depends on crop cycles. The argument that the deal should be allowed because Canada has too little direct inward foreign investment (Mintz and Krzepkowski, FP Oct. 6) is problematic since there is no established economic theory that demonstrates the ’right’ amount of foreign investment. The case should be judged on the long-standing economic test – does it bring net benefits to Canada, not on potential impacts of a government refusal on future flows of direct foreign investment.

http://tinyurl.com/2475gq9

This is, in a sense, one corollary of the point that I keep bringing up (to your irritation)- continuing to lower/optimal CIT.

[Stephen Gordon]

There will be a post tomorrow on the topic, to go along with the Globe thingy.

[Just visiting from Macleans]

Great.

[Mike Brock]

I'm on the side of the weaker dollar. Not due to fundamentals. The fundamentals should move the Canadian dollar higher on strengthening demand of commodities.

No, it will fall, because the Head of the Soviet Gosplan, Mark Carney, will once again go on a campaign of talking down the dollar. And when that fails, he'll take action to devalue it, so we can further dilute the wealth of savers, and sell Canada's resources short.

[Mike Moffatt]

Oh, you wacky libertarians!

[Mike Brock]

Well, we'll see who's right, won't we? =)

[Mike Moffatt]

I wouldn't be surprised if the CAD fell vis-a-vis the USD (though I wouldn't be surprised if it rose, either. I'm not big on predictions). That being said, I can't see the BoC changing their mandate any time soon, which, you will note, doesn't involve the exchange rate. Though my comment was wholly about the 'Soviet Gosplan' characterization. (Comedy tip: North Korea references are 20% funnier than Russian ones).

Looking forward to Prof. Gordon's Economy Lab chat. Economy Lab has been publishing some great stuff lately.

[Mike Brock]

Mike,

The last time the Canadian Dollar crested parity with the USD, Carney was giving a speech every second day before the financial press, that the high dollar was going to imperil the Canadian economy. I covered these constant speeches back when I was at the Western Standard.

It even got to the point where the Globe and Mail and Financial Post were calling him on it. It was clear to everyone in involved, that his intent was to scare foreign investors away from the Canadian dollar in order. Hence the term "talking it down".

My point is, this sort of behaviour on that part of the Bank of Canada Governor is extraneous to the mandate, and happens despite that. Inflation targeting may be the official basis by which the BoC sets rates, but the BoC also employs naked and obvious scare tactics to try and have an effect on the value of Canadian dollar through stoking fears in currency traders.

So yeah, is stick by my insulting remarks for Carney.

[Just visiting from Macleans]

(Comedy tip: North Korea references are 20% funnier than Russian ones).

Not if the discussion centres around centrally planned chrome shortages:

http://www.youtube.com/watch?v=yrz1q_zk-SU

[Andrew F]

I'm pretty sure that the exchange rate has a significant impact on the inflation rate, and as such, is of fairly direct concern of the governor of the BoC. I have no problem with him jawboning, especially once interest rate policy has been exhausted as it was last year. I'd rather jawboning than QE.