- The Washington Times - Friday, September 21, 2007

NEW YORK (AP) — For the first time since Gerald Ford was president, a Canadian dollar can buy as much as the U.S. dollar.

The U.S. dollar’s recent decline against the Canadian “loonie,” the euro, and even the Indian rupee, means Americans will pay more for imports and trips to Paris, Rome, Bangalore and Toronto. It also may drive overseas demand for U.S. goods and help raise profits at U.S. multinational corporations.

The U.S. dollar reached 1-to-1 parity against the Canadian dollar yesterday for the first time since November 1976. That means one Canadian dollar now buys one U.S. dollar, so a bottle of maple syrup could cost an American as much in Toronto as it does in New York.

Today’s numbers, however, do not mean that the dollar is facing a meltdown.

Yesterday’s drop is of greater concern to currency markets than U.S. households, except “if you are a connoisseur of French wines or Canadian maple syrup,” said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn.

A lower dollar makes U.S. exports more competitive, which is good news for American manufacturers but spells rising prices for imports to the United States. The dollar’s decline also diminished the spending power of American tourists while attracting to the United States foreign visitors who seek cheaper accommodations and shopping.

The Canadian dollar hovered near parity in late New York trading yesterday, buying 99.93 U.S. cents.

Known as the loonie because of the bird pictured on the one-dollar coin, Canada’s currency rose sharply against the U.S. dollar after the Federal Reserve on Tuesday announced a dramatic half-point cut in its benchmark interest rates. While aimed at shoring up U.S. credit markets, the cut further weakened the dollar against other currencies by reducing returns on dollar-denominated investments.

Even before the rate cut, the Canadian dollar experienced a summer of record highs. Canada, a major oil exporter, has benefited from soaring crude prices and a strong economy.

The U.S. currency also plummeted to a new low yesterday against the 13-nation euro, which traded above $1.40 for the first time since it was introduced in 1999. The euro rose as high as $1.4098 yesterday before falling back to $1.4076, up from $1.3964 late Wednesday.

The $1.40 level has long been viewed as a key benchmark in terms of driving the euro toward becoming a reserve currency of choice — a position long held by the now-weakening dollar.

The dollar was down across the board yesterday, dropping to a nine-year low against the Indian rupee amid strong demand from foreign funds investing in India’s booming economy. The rupee rose to 39.92 per dollar in intraday trading, breaching the 40 rupees-per-dollar mark for the first time since May 1998.

The dollar also dipped against the British pound, falling to $2.0099.

The U.S. currency fell against the Japanese yen to 114.44 from 116.09 late Wednesday.

The falling dollar could be good news for multinational corporations because it makes American-made goods more affordable in international markets while making it harder for foreign manufacturers to undercut domestic competition.

On the other hand, it worries the U.S. government by scaring away foreign investors who help to finance the country’s debt. As investment in U.S. Treasury securities dwindles, the government will have to pay higher rates at weekly auctions to find buyers for its bills, notes and bonds.

That eventually could push up borrowing costs for all Americans.

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