These are stories Report on Business is following Wednesday, Oct. 1, 2014.
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Putting the loonie in perspective
Bank of Montreal's chief economist asks this question today: "How weak is the loonie?"
Douglas Porter's answer: "Aside from the U.S. dollar, not notably."
While the Canadian dollar has sagged more than 5 per cent so far this year, the yen, euro, Aussie and New Zealand dollars, Swiss franc and Brazil real are down more against the U.S. currency.
"Aside from a brief spell in March (just ahead of the Quebec election), this is the weakest the currency has been since it was crawling back from the financial crisis in 2009," Mr. Porter said of the loonie.
Helping to drive the currency down, he added, are, of course, the U.S. dollar rally, sinking commodity prices and the fact that the Bank of Canada "has shifted away from a tightening bias, and pretty much put it in neon that they will lag the Fed" on hiking interest rates.
Mr. Porter's comments came as the latest report from the International Monetary Fund showed central bankers boosted their holdings of the Canadian currency to $127.3-billion (U.S.) in the second quarter of the year, an increase of 6.6 per cent for their reserves.
The loonie, as Canada's dollar coin is known, remains the world's fifth-largest reserve currency, representing 2 per cent of the total.
That's well behind the two major currencies, the U.S. dollar and the euro, at 60.7 per cent and 24.2 per cent, respectively, and also below Britain's pound and the Japanese yen, at 3.9 per cent and 4 per cent.
The IMF only recently added the Canadian and Australian dollars to the elite list of reserve currencies. And, as of the latest report, the Canadians are outpacing their Australian mates.
Holdings of the Aussie dollar rose 2.3 per cent to $120.1-billion in the second quarter.
The latest reading, released yesterday, showed the greenback holding its own, up just slightly, while holdings of the euro fell 3.5 per cent.
The dumping of the euro and the move into others dominated the second quarter, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
Notably, reserve managers in emerging markets were big sellers of the European common currency and "important" buyers of the loonie and money that ranks in the IMF's "other" category.
This, Ms. Sutton added, is a "long-term positive" for the Canadian dollar, as it is for the Australian currency.
"[Foreign exchange] managers have a clear preference for CAD over AUD," she said, referring to the currencies by their symbols.
"However, the core takeaway is that as managers diversify from EUR, both CAD and AUD are likely to be supported."
The loonie has been on the weak side, of late, as the U.S. dollar surges and markets fret over China's economy, which tends to weigh on commodity-linked currencies.
Coupled with that is the fact that the Bank of Canada, under Governor Stephen Poloz, has a "neutral" policy, its signal to the markets that its next move on interest rates could be up or down, though no one expects the latter.
The Canadian and Australian dollars have seen a marked increase in the reserve holdings since late 2012, rising almost 47 per cent and 36 per cent, respectively.
And, said foreign exchange strategist Kevin Hebner of JPMorgan Chase, you can expect those holdings to rise "significantly" going forward.
"Just over half of the CAD increase occurred because of a markedly stronger currency (up 3.4 per cent in the quarter), while the AUD gain was almost entirely due to the 2-per-cent gain in the currency," he said, referring, of course, to the second quarter rather than what we're seeing now.
"Over coming quarters we expect allocations to both the CAD and AUD to rise, as [foreign exchange] reserve managers diversify away from the USD and EUR," Mr. Hebner added.
"Finally, it is worth highlighting that non-residents own a relatively small share of the Canadian government bond market, suggesting that net buying by foreign central banks could continue for some time. Such a trend would provide a nice tailwind for the CAD over the medium-term."
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Brookfield said to win bid
No pun intended – okay, maybe pun intended – but Canada's Brookfield Asset Management appears to have won the bet for the troubled Revel Casino Hotel in Atlantic City.
The Reuters news agency today quotes sources as saying Brookfield's $110-million (U.S.) bid for the casino eclipsed a rival offer of $90-million by Glenn Straub, a real estate developer based in Florida.
As Streetwise columnist Boyd Erman reports, Brookfield would add its acquisition to a stable of holdings that include the Hard Rock Hotel and Casino in Las Vegas and the Bahamas Atlantis resort.
According to Reuters, Revel Casino cost $2.4-billion to construct.
- Brookfield wins auction for bankrupt Revel Casino
- Boyd Erman in Streetwise (for subscribers): Fate of Brookfield bid for Revel casino known soon
Owners sell Grande Cache stake
Marubeni Corp. and its partner are dumping their stakes in Canada's Grande Cache Corp.
The sale price is $2, or $1 to each owner.
(That's $1 U.S., by the way, Otherwise, as noted above, the value of the deal would be about 89 cents for each.)
Marubeni led a $1-billion acquisition of Grande Cache in 2011, when the price of coal was running high.
It owns 40 per cent of Grande Coal, and its partner, Winsway Enterprises, holds almost 43 per cent.
Up Energy Development Group Ltd. is buying both.
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