ON WALL STREET/Conor O'Clery: There are many reasons why Quebec City is such a draw for tourists from the United States, especially in these post-September 11th days when the US is at war and Americans don't like the idea of flying to far-away countries.
Quebec has all the charm of an old French city, and the efficiency of a north American town. In winter its snowy streets among slate-roofed granite houses clustered round the Chateau Frontenac are like scenes from Christmas cards. It is virtually impossible to get a bad meal in its European-style restaurants, where every menu features excellent moules marnière.
It is possible to drive there from New York without encountering a single traffic light, stopping only briefly at Canadian immigration, and to arrive in a place with a different culture, language and climate in less than 10 hours.
But possibly the biggest attraction for American visitors at this time is the cheap Canadian dollar. A couple can spend a long weekend in a charming hotel in Quebec's Old City for the equivalent of $200 (€230), about a third of what it would cost in the rural hideaways of Connecticut.
The reason for the cheap currency is a mystery and it infuriates Canadians. Nicknamed the loonie because of the loon depicted on dollar coins, the Canadian dollar has been falling steadily since 1974 when it was above par with its US counterpart, and is today some 40 per cent cheaper. It refuses to recover, despite a robust Canadian economy, a large and growing trade surplus and higher interest rates.
The weak Canadian dollar makes US products more expensive for Canadians, and makes it more costly for them to take their traditional winter vacations in Florida. It also enables US firms to buy up Canadian companies. The Canadian government has become so concerned that it has abandoned its long-standing laissez faire attitude - after all it made exports cheaper - and tried to boost the loonie, sending finance minister Mr Paul Martin and Bank of Canada governor Mr David Dodge to New York earlier this month to talk up the currency with Wall Street firms.
It didn't work. And things have now got to the point where a poll of Canadian businesses not long ago found that more than half of the country's corporate leaders believe the country should consider abandoning the currency in favour of the US dollar.
I asked Mr Alister Smith, deputy chief economist for the Canadian Imperial Bank of Commerce in Toronto, what was going on with the loonie. "Economists are running out of excuses for trying to explain the weakness of the Canadian dollar," he said. "Over the years we've had a long list of explanations, most of which we have been running lines through. For a while, the view was that Canada had to get its fiscal house in order. Canada has done that, with debt to GDP continuing to drop and with balanced budgets. We are no longer running interest rates below the US. Commodity prices have been weak and there tends to be a correlation between the Canadian dollar and commodity prices.
"But what frustrates a lot of Canadians is knowing their economy has become less dependant on resources and commodities; the share of manufactured goods has been rising through the 1990s. So you go through all these factors and you ask 'what's wrong with Canada?' "
The real story, he believes - and it points to what underlies the euro's continued weakness with the dollar - is the continuing and sometimes irrational strength of the US dollar against all world currencies.
"No one has a smoking gun here," he said. But the US equities market "has been attracting capital flows from virtually around the world and Canadians too have been buying a lot of equities as if there was no tomorrow". People like to have their assets in dollar markets. Like the markets, however, currencies can be irrational and there may come a point "when people will look at the euro and say this doesn't make any sense whatsoever vis a vis the US dollar, and similarly with Canada".
Canadians are now looking with growing interest at how the euro is faring in world markets. The impact will be felt in North America if it rises at the expense of the US dollar, which many economists believe will be inevitable as the euro comes to share more equally the role of international reserve currency (currently 68 per cent of which is held in dollars and 13 per cent in euros) and other countries feel able to unload some of their dollars, thus bringing down the greenback.
This could dramatically alter currency exchange rates between the US and other countries like Japan and Canada. Former US Secretary of the Treasury Mr Robert Rubin said the rise of the euro could even bring about a return to a global fixed exchange-rate regime similar to the one before the 1970s.
In the meantime, Quebec, with its strong sense of French nationalism, would undoubtedly prefer to join the euro, rather than the greenback, if the loonie had to be abandoned. It's a long way from that yet and, in the meantime, the city on the magnificent St Lawrence is the cheapest and best holiday destination by far for New Yorkers seeking a little foreign-ness, and a break from the war against terrorism.
