Skip to main content

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.

Read Premium CAD Forecast

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.

Foreign exchange international money transfer

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.

Labels:
Location: Markham, ON, Canada

Comments

Post a Comment

Popular posts from this blog

The Advantages of Foreign Exchange for Tech Companies

When it comes to foreign exchange, there are a lot of advantages that tech companies can take advantage of. First and foremost, foreign exchange can help tech companies access new markets and customers. In addition, foreign exchange can also help tech companies hedge against currency risk, and it can provide opportunities for arbitrage. Let's take a closer look at each of these advantages in turn. Increased Globalization of Technology Companies The globalization of technology companies has led to an increase in the need for foreign exchange services. As these companies expand their operations into new markets, they require foreign currency to pay for goods and services. In addition, many technology companies now have a global supply chain, which means they are buying and selling goods and services in multiple currencies.  Access to new markets and customers.  When you expand your business into new markets, you're also opening up your customer base to a whole new group of peopl...
Post a Comment
Read more

4 Foreign Exchange Risks to Consider When Running a Business

When running a business, there are a lot of things to think about in order to ensure its success. One important thing to keep in mind is the foreign exchange risk that your business might face. This type of risk can come from a number of different sources, so it's important to be aware of them and take steps to mitigate their impact. Here are four of the most common foreign exchange risks to consider when running a business.   1. Economic Instability Risk   One of the biggest foreign exchange risks that businesses face is economic instability. This can come from a number of different sources, such as political unrest or natural disasters. When there is instability in a country, it can lead to a decrease in the value of its currency. This, in turn, can make it more expensive for businesses to import goods from that country or sell goods to customers in that country. To mitigate this risk, businesses should diversify their supplier and customer base so that they are not too reli...
Post a Comment
Read more

How Political Instability Impacts Foreign Exchange Rates: Analyzing Recent Examples

Political instability can have a huge impact on foreign exchange rates. The foreign exchange market, or Forex, is the largest and most liquid financial market in the world with an estimated daily trading volume of over 5 trillion dollars. It is an ever-changing market that is driven by news and events, both global and domestic. When it comes to political instability, news reports can cause rapid changes in exchange rates that can have a significant effect on businesses. Let’s take a look at some recent examples to understand how political instability impacts foreign exchange rates.   US-China Trade War   One of the biggest influences on foreign exchange rates in recent years has been the ongoing trade war between China and the United States. In 2018, President Trump imposed tariffs on Chinese imports which caused a dramatic drop in the value of China’s currency, the Renminbi (RMB). This led to China devaluing its currency to mitigate some of the effects of the tariffs. As a re...
Post a Comment
Read more