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Era of greenback nears end The U.S. dollar's reign is nearing its end, a leading U.S. economist and author says.

"I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance," Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley, writes in The Wall Street Journal.

"The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar," writes the author of Exorbitant Privlege: The Rise and Fall of the Dollar and the Future of the International Monetary System.

Among his points:

  • Technological change is undermining the dollar's monopoly.
  • There will soon be real rivals that include the yuan and the euro.
  • The dollar's save-haven status is under threat.

"Now, mainly as a result of the financial crisis, federal debt is approaching 75 per cent of U.S. gross domestic product," he writes.

"Trillion-dollar deficits stretch as far as the eye can see. And as the burden of debt service grows heavier, questions will be asked about whether the U.S. intends to maintain the value of its debts or might resort to inflating them away. Foreign investors will be reluctant to put all their eggs in the dollar basket. At a minimum, the dollar will have to share its safe-haven status with other currencies."

Carney holds the line Bank of Canada Governor Mark Carney held his benchmark lending rate steady at 1 per cent today, citing a faster-than-expected recovery but one with risks ahead. All in all, the chance of an early interest rate hike now looks less likely.

Still included in the central bank's accompanying statement was the line that "any further reduction in monetary policy stimulus would need to be carefully considered," suggesting Mr. Carney is not priming the markets for an interest rate hike just yet.

The central bank chief warned about the continuing headwinds from a strong Canadian dollar and, now, the recent upheaval in the Middle East and North Africa that has pushed up the price of oil , Globe and Mail economics writer Jeremy Torobin reports. Europe's debt crisis is also a sore point.

"The global economic recovery is proceeding broadly in line with the bank's projection in its January Monetary Policy Report (MPR), although risks remain elevated," the central bank said.

"U.S. activity is solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. Robust demand from emerging-market economies is driving the underlying strength in commodity prices, which could be further reinforced temporarily by supply shocks arising from recent geopolitical events."

Still, the central bank noted the faster-than-anticipated rebound in Canada and further proof of a rebalancing of the economy.

"While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes," the statement said.

"Business investment continues to expand rapidly as companies take advantage of stimulative financial conditions and respond to competitive imperatives. There is early evidence of a recovery in net exports, supported by stronger U.S. activity and global demand for commodities. However, the export sector continues to face considerable challenges from the cumulative effects of the persistent strength in the Canadian dollar and Canada's poor relative productivity performance."

Avery Shenfeld, the chief economist at CIBC World Markets, pointed out that there was little new in the comments, which weren't as "hawkish" as some observers were expecting.

"Therefore, a bit negative for the C$ and bullish for the short end of the yield curve, but we're sticking with our view that an upgraded economic outlook in April's policy report will pave the way for a rate hike in May, assuming the C$ settles down a bit before then," he said.

Timing of the next interest rate hike is, as always, the source of much speculation, and markets can probably rule out an early increase given the central bank's comments. Some economists had been calling for a spring increase, others for July, and even for October.

"In the wake of today's statement, markets will pare back bets that a rate hike is in the pipeline in April or May," said Toronto-Dominion Bank senior economist Pascal Gauthier. ... All said, with the added consideration that the U.S. Federal Reserve is expected to bring [quantitative easing]to term by June, a bit longer pause for the [Bank of Canada]ntil a next hike in July still appears the fairest bet."

Senior economist Michael Gregory of BMO Nesbitt Burns agreed: "There are no indications here that rate hikes are close. We judge that the bank is waiting for evidence that U.S. economic performance is strong and steady enough to ensure that Canadian exports will contribute to Canadian economic growth regardless of the level of the loonie. We've pencilled in a July resumption of rate hikes (after another quarter of data and the end of Fed easing). The wait also gets us through budget season (providing more info on the extent of fiscal consolidation) and mortgage season (providing more info on whether moral suasion and tighter mortgage insurance rules are working to slow household credit growth). Carney & Co. appear in no hurry to act, while keeping their policy cards close to their chest."

Jobless levels a blight The global economy is clearly on the mend but, to borrow from Federal Reserve chairman Ben Bernanke today, there's no real recovery until jobless levels come down.

Output has been climbing - just look at manufacturing data released today - but unemployment rates remain stubbornly high in the wake of the great crash.

Eurostat, for example, the EU's statistics agency, reported today that the jobless rate among the 17 nations that share the common currency dipped in January to 9.9 per cent, hardly a move from December's 10 per cent. For the 27 countries of the EU, unemployment dipped to 9.5 per cent from 9.6 per cent. Note that both readings show jobless levels at virtually the same as a year ago.

The statistics agency estimated that more than 23 million people are without work in the EU - that's up by almost 100,000 from a year ago. For young people in the EU, the jobless rate stands at 20.6 per cent.

And amid all the noise over inflation warnings and high commodity prices today, at least Mr. Bernanke didn't lose sight of the fact that millions of Americans are without work. He should be applauded for his testimony in Washington, where he said that without notable job creation, there's no real rebound.

Here's what he said:

"While indicators of spending and production have been encouraging on balance, the job market has improved only slowly. Following the loss of about 8.75 million jobs from early 2008 through 2009, private-sector employment expanded by only a little more than 1 million during 2010, a gain barely sufficient to accommodate the inflow of recent graduates and other entrants to the labour force.

"We do see some grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in December and January, a drop in new claims for unemployment insurance, and an improvement in firms' hiring plans. Even so, if the rate of economic growth remains moderate, as projected, it could be several years before the unemployment rate has returned to a more normal level. Indeed, [Federal Open Market Committee]participants generally see the unemployment rate still in the range of 7.5 to 8 per cent at the end of 2012. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established."

In Canada, the jobless rate is at 7.8 per cent despite the rebound in job creation since the depths of the recession. That's because more people are joining the labour force in hope of finding work.

San Francisco Fed names new chief The research director at the Federal Reserve Bank of San Francisco was named today as its new president, succeeding Janet Yellen, who became vice-chair of the Fed.

John Williams, according to Bloomberg News, represents a region that accounts for some 20 per cent of the U.S. economy.

"He has distinguished himself as one of the most respected economists in the Federal Reserve System because of his extraordinary work in the field of monetary policy analysis," said Douglas Shorenstein, who chairs the San Francisco Fed's board of directors.

"He has been a superb leader of our well-respected economic research group, and earlier gained valuable experience serving at the Federal Reserve Board of Governors and at the White House Council of Economic Advisers."

Gold at fresh high Gold futures closed today at a fresh record of $1,431.20 (U.S.) an ounce in New York today, and oil prices pushed higher amid the turmoil in the Middle East and North Africa. Silver also pushed ahead.

"You have that speculative flight-to-quality trade coming into gold right now," Michael Gross, a broker and futures analyst with OptionSellers.com, told The Wall Street Journal.

Ford Canada sales slip Ford Motor Co. of Canada Ltd. vehicle sales slid 10 per cent last month, but the auto maker still jumped back into top spot in the sales rankings, Globe and Mail auto writer Greg Keenan reports today.

Deliveries dropped to 16,081 from 17,920, Ford said. General Motors of Canada Ltd. led the rankings in January, but Ford said it has taken over top spot for the first two months of the year despite the February decline.

GM sales slipped 12 per cent in Canada.

Court to hear Wind Mobile appeal in May Globalive Holdings says the Federal Court of Appeal has set May 18 for a hearing into an appeal by the wireless carrier and the federal government over its ownership.

The court also temporarily stayed a Federal Court ruling until it rules.

To recap the saga to date: The Canadian Radio-television and Telecommunications Commission had effectively blocked the launch of Globalive's Wind Mobile service in Canada, deeming the company did not meet ownership requirements.

The Harper government overruled the CRTC, but the Federal Court then overruled the government.

"From the beginning, we have maintained that we are fully compliant with the rules," said Globalive chairman Anthony Lacavera. "Industry Canada saw this clearly. Cabinet saw this clearly. The Federal Court did not say otherwise, only that two 'legal errors' were in the Cabinet order. We are very confident the Court of Appeal will rule in our favour and look forward to putting these legal roadblocks set up by our competitors behind us."

Scotiabank sees no housing meltdown Bank of Nova Scotia projects a "somewhat softer housing trend" in Canada later this year and into 2012, but it sees little chance of a U.S.-style meltdown.

"It is widely expected that the housing boom of the past decade will be followed by a period of softness," economist Adrienne Warren said in a report today.

"Housing is inherently cyclical. Prolonged cycles of rising home prices, such as those that occurred from the mid-1960s through the mid-1970s as well as the latter half of the 1980s, are typically followed by a downcycle extending over a number of years.

"Yet it is also highly unlikely that Canada will experience a U.S.-style housing collapse. The roughly 25-per-cent correction in U.S. home prices from their 2006 peak was primarily the result of weak lending practices and high-risk mortgage products largely absent in Canada, and the subsequent wave of U.S. foreclosures. Canada's housing market in general is not oversupplied. Builders have begun to slow the pace of construction in line with underlying household formation, and mortgage arrears are stable."

Manufacturing input costs on rise Global manufacturing may be on the rebound from the great crash, but input costs are rising at a worrisome pace.

In the euro zone, for example, the factory sector grew at its fastest pace in almost a decade, according to surveys today, Manufacturers also expanded in the United States, Britain, and India, and in China, though at a slightly slower pace.

But what the indexes released today also showed is how commodity prices are driving up costs.

The fresh readings came as Eurostat, the statistics agency of the European Union, issued a "flash estimate" of annual inflation for February, projecting it will rise to 2.4 per cent from 2.3 per cent in January.

"The price indices remain the source of most concern," said Mark Williams, the senior China economist at Capital Economics in London, referring to two purchasing managers' indexes, or PMIs, related to China.

"Both PMIs show input prices accelerating again after easing in the previous couple of months. Both are still below their earlier peaks, but there is clearly a risk that they will rise further. That said, the Markit survey also underlines how little pass-through there usually is from input prices to those paid by consumers."

In the United States, the price component of the Institute for Supply Management's manufacturing reading showed costs hitting their highest in more than two years. But, said Paul Dales, senior U.S. economist at Capital Economics in Toronto, the index "follows the oil price and tells us very little about the ability of firms to pass higher costs on."

BMO boosts profit Bank of Montreal posted a record first-quarter profit of $776-million or $1.30 a share, driven by stronger earnings from its capital markets and wealth management divisions, and maintained its dividend at 70 cents a share. Cash earnings per share were $1.32.

The results were slightly better than analysts had expected, Globe and Mail banking writer Grant Robertson reports.

BMO's profit jumped 18 per cent from $657-million or $1.12 a year earlier, while revenue climbed 11 per cent to $3.35-billion.

"BMO Capital Markets had strong growth in both net income and revenue with good performance in investment banking, where mergers and acquisitions revenue and debt underwriting fees were up appreciably from a year ago," said chief executive officer Bill Downe.

Insurers can't charge different rates Insurers in Europe have been banned from charging different rates to men and women, no matter that women live longer and have enjoyed lower premiums.

The European Court of Justice, the top court in the EU, ruled today in favour of two men from Belgium, who said the widespread practice was discrimination.

The ruling promises widespread changes for the industry, and women may now see their auto premiums rise despite the fact they're considered better drivers.

According to The Associated Press, Britain's Conservatives were angry

"It is a statistical reality that young men have more accidents than women so it should be reflected in their premiums," said European Parliament member Sajjad Karim. "Boy racers will now have even more money to buy unsafe fast cars, whilst safer drivers will be hit hard in their insurance premiums."

Desjardins boosts RioCan Desjardins Securities today boosted its target for units of RioCan Real Estate Investment Trust , to $25.25 from $23.30.

"With continued accretive acquisitions, strong occupancy and leasing results, increased demand for space from U.S. retailers, more development projects upcoming and cheap financing, we are optimistic that RioCan will generate healthy cash flow growth over the next few years," said analyst Jeff Roberts.

VW shows off new minibus Anyone above a certain age will remember the iconic VW minibus of the '60s so loved by hippies and a frequent fixture on the roads around Big Sur.

Well, start tie-dyeing your shirts: Volkswagen AG may be poised to bring it back, though this version is aimed at the environmentally conscious, digital generation.

At the Geneva Auto Show today, The Associated Press reports, Volkswagen showed off a concept vehicle that's a little bit shorter and a little bit wider than the original.

This one has an electric motor and, the report said, uses an iPad to work the entertainment and other components of the bus. Volkswagen, AP said, hasn't said whether it will produce the vehicle.

Boyd Erman's Morning Meeting Bank of Montreal shareholders are going to like this -- only two months after announcing the purchase of U.S. bank Marshall & Ilsley Corp., BMO is saying it's going to be much less dilutive, Streetwise columnist Boyd Erman reports today.

In Economy Lab today

Canadians are burning through their savings, to a point where Americans are now bigger spendthrifts than their northern neighbours, The Globe and Mail's Tavia Grant reports today.

Although the Bank doesn't publish its estimate for the neutral rate, it would appear from past experience that it lies somewhere around 3.0-3.5 per cent, economist Stephen Gordon writes.

In Personal Finance today

With interest rates ready to rise, it's time to build in some slack to prepare for higher payments. Rob Carrick explains how to do it.

Homeowners are turning to professional advisers to vet their renovation projects and save them from expensive mistakes. Dianne Nice examines the trend and offers tips for those planning a reno.

A high loonie and low prices make U.S. properties tempting, but Canadians need to do their investment homework, writes Preet Banerjee.

From today's Report on Business

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:15pm EDT.

SymbolName% changeLast
BMO-N
Bank of Montreal
+1.35%97.68
BMO-T
Bank of Montreal
+1.13%132.25
BNS-N
Bank of Nova Scotia
+1.21%51.78
BNS-T
Bank of Nova Scotia
+0.94%70.07
CM-N
Canadian Imperial Bank of Commerce
+1.3%50.72
CM-T
Canadian Imperial Bank of Commerce
+1.13%68.67
F-N
Ford Motor Company
+1.68%13.28
GM-N
General Motors Company
+1.7%45.35

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