Will Canadian dollar ever regain its value against US dollar in the near future and why?

USD/CAD Forecast: Implications of the US and Canadian House Starts

A country’s currency is similar to shares in a corporation in that it’s value is determined by a number of mostly subjective considerations based on a combination of facts and rumours. However the one difference in valuing currency as compared to free flowing stocks is that currencies are almost all valued against the US dollar which is the world’s standard currency and is recognizable around the world as such. Prior to the US dollar being the world standard the world had used gold and silver weights which still seems more equitable but for a number of reasons that’s not likely to return in the foreseeable future.

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This has resulted in the fact that there is trillions of dollars in actual US currency floating around the world combined with the fact that virtually every country keeps within their central bank’s asserts a “basket” of the worlds major currencies, (Euros, Yens, Pounds, etc.), all heavily weighted with US dollars. There is actually many more US dollars floating around the world and in national “baskets” than there is in the United States itself. And the US Treasury keeps printing those dollars and the rest of the world keeps buying those dollars and that’s what props up the US economy and allows it to function in spite of a debt load that would spell disaster for any other country.

Canada, like the rest of the world’s nations, has it’s currency valued against the US dollar. Of course you can determine the value of the Loonie against the Euro or Mexican Peso but it all comes back to how each of those currencies is valued against the US dollar.

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And that brings us back to the question, “Will the Canadian Dollar ever match the USD again?” The answer is - probably. The last time the Loonie matched and actually surpassed the USD for a few years was around 2007–2010 when the US was locked in a heavy recession with a badly damaged banking system and Canada was, in comparison, riding the $100+/Barrel Oil bonanza as well as being fiscally very sound with balanced budgets and was actually paying down it’s accumulated debt. Thus the world currency exchanges saw the Canadian dollar as a stronger currency than that of the US and consequently set its value as much as 10% higher than the USD.

There’s no reason to think similar circumstances will not occur again. But that is only a good thing for Canadians who wish to travel, especially to the US. It’s not a good thing for the Canadian economy because our goods that we sell abroad become more expensive and tourism suffers because we become a very expensive destination as compared to the US or many other places around the world. I personally believe the ideal place for the Canuck Buck is somewhere between 85–90 cents versus the USD but that’s only my opinion. It’s up to the world’s currency traders to decide and my personal preferences carry no weight in their decisions.

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