Canadian dollar not strong. American dollar just weak?

Question

Almost every day, we hear the Canadian dollar is setting new records. But is our dollar getting stronger, or is the American dollar just weaker, since our dollar to euro ratio has stayed about the same.

Answer 1

Both.

In order to tell, you need to look at other currencies. The Canadian dollar is up about 10% vs. the Euro in the last four months. The Canadian dollar is up about 17% vs. the US dollar in the same period of time. It is about the same if you average out a lot of currencies.

So, about half the rise is due to the fall of the US dollar and about half is due to the increase in the value of the Canadian dollar.

Often you need to consider were money is going. If folks are worried about the US economy and debt and sell off their US dollars... where are they investing this money into? Right now, folks are beating on the Canadian economy with its balanced budgets, paying debt off faster than expected, low-unemployment, and high resource prices (oil, gas, power, etc.). Many folks are also surprised that the Canadian economy has shown an unexpected independance of the US economy. Development of overseas markets - Asia, Europe, and South America (often due to US trade disputes -(softwood lumber, California utilities going bankrupt, beef, aluminum, grain, sugar, etc.) has allowed the Canadian economy to grow even when the US economy has been sluggish. This is somewhat new. A lot of folks appear to be betting that even if the US economy tanks that Canada exports won't be so severely hurt.

Answer 2

The international money market is not necessarily one that is terribly sensible. Currencies can be over or undervalued, but usually within a reasonal boundary.

Recently the Australian dollar has risen in value, however, previously it was undervalued, so this may be an issue with the canadian dollar.

Currencies are valued against the US$ so comparing CA$ with Euros is not going to be directly easy.

Euros are going from strength to strength and many people have proposed that the world standard should be based on the Euro rather than the US$ (However they were probably saying the same thing about the Japanese Yen back in the 1980, so maybe we won't listen them too carefully).

Also it is a recent thing, so that it is hard to compare prices to see. For example, there are indexes based on the price of things such as Starbucks coffees, pizza hut pizzas and McDonald's burgers to see whether a currency is under or overvalued. However local price adjustments would take time.

Or maybe you are just feeling insecure, just remember the war of 1812 (Canada kicks the butt of a rouge terrorist state...the USA and plan to have your next holiday across the border).

Answer 3

It is mostly the weak American dollar, but since Canada is an exporter of oil, the high price of oil should make the Canadian dollar a little stronger against the euro because it increases the value of your exports.

Answer 4

The Opec deal over petro-dollars made the US able to receive tons of goods since the 70's to invest in their infrastructure and make business better. Instead, they managed their export the same way a crackhead would manage a no limit credit cards. 30 years of TRADE deficits... thats the result. (I emphasize trade, because its not a government budget deficit. A trade deficit means that the whole country don't sell enough goods to cover their imports.

Answer 5

Bush administration let the dollar go weak so that oil price would go up and Texas make lots of money.

Answer 6

The dollar is weak - largely due to the Iraq war.

Answer 7

they should have a duel and lets see who comes out on top. =D haha. i dont know why but i just felt like saying that >.<