CAD vs. US: Overview
Just one year ago, the Canadian Dollar was at its lowest exchange rate with US dollar since July 2005. This month, the Loonie reached the par and is expected to stay there within the next little while.
From January to March 2010, a dollar CAD was blocked at around 0.95 US dollar, when strong economic data and expectations for higher domestic interest rates were supporting the Loonie. CAD rose to parity for the first time since July 2008 earlier this month, on April 6th, and finally closed above parity about a week later on April 14th.
Why is the Canadian currency raising such a wave of popularity?
Like I said above, Canadian economic data are stronger then expected. In fact, Canada is now seen as the leader of economic grows this year (over other G7 countries). Such good results allow us to believe in expecting an early raise of the general interest rates by the Bank of Canada, while United States is still trying to recover from the economic downturn.
How will it affect Canadian investors’ behavior?
With a strongest national currency, the purchasing power of Canadians increases, making the foreign products relatively less expensive in CAD. Also, Canadians will have lots of opportunities on the foreign markets, in particular in real estate. Canadian companies can invest abroad, by means of taking stakes in foreign companies.
As of April 24th the CAD/USD exchange rate was below par, but the expected trend is in favor of the Loonie beginning next week.
