To focus on just one currency pair, for the first time in 30 years, the Canadian Dollar looks set to surpass the US dollar (see graph above).
Given the increasing importance of oil and other commodity prices in driving the appreciation of the Canadian dollar, I think an abrupt fall in commodity prices is the only possibility of the Canadian dollar not surpassing the value of the US dollar in short order. (According to http://www.xe.com/, the Canadian dollar is currently trading at 0.9904 US Dollars).
2 comments:
Hi Dr Yetman,
I don't quite understand this:
"Given the increasing importance of oil and other commodity prices in driving the appreciation of the Canadian dollar..."
1. Why oil and other commodity prices are getting important?
2. What does that has to do with CND$?
The recent growth of the Canadian economy has been largely driven by the growth of its commodity and oil sectors. The western provinces of Canada are booming as the oil sands come on tap as a major new source of oil, for example. The Canadian dollar increases as the potential future value of this resource increases, which is measured by the expected future price of oil. The expected future price of oil moves closely with the current price of oil.
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