Behind the Headlines June, 2006

Article Excerpt

The Canadian dollar remains high, in part due to rising commodity prices. Unlike many industrialized countries, Canada is a major exporter of commodities, particularly oil and metals. Hopes that the new Conservative government of Prime Minister Harper will cut taxes and improve productivity have also raised demand for Canadian dollars on foreign exchange markets. The Bank of Canada has raised interest rates for seven consecutive months, largely in response to rising inflation. This pushes up the value of the Canadian dollar, as foreign capital moves into Canada to take advantage of higher yields. While the Resources sector has prospered, the rising dollar has hurt some segments of the Canadian economy. A high dollar makes exports more expensive to foreign buyers, so they buy elsewhere. Many manufacturers who sell outside of Canada continue to suffer. We think you should maintain modest exposure in Resource stocks. Stick with our safety-conscious recommendations, including Imperial Oil, $40, symbol IMO, EnCana, $56, symbol ECA, and Fording, $39, symbol FDG.UN,…

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