Canadian Currency Rates: Exchange Money Influences, The USD And Investing In The Loonie
The currency of Canada, often referred to as the ‘Canadian dollar loonie’ has enjoyed a tremendous appreciation in recent years due to the bullish nature of worldwide commodity markets. As a commodity producing nation, Canada’s favorable terms of trade, through the demand for its raw materials such as gold, oil, metal and agricultural products has resulted in strong demand for the currency. In fact, after falling to a low of 61.79 cents on the 21st January 2002, the Canadian exchange rate has appreciated rapidly against all major currencies. The currency recently reached parity against the US dollar due partly to the strength of Canadian foreign exchange rate and the inherent weakness of the US dollar.
The demand for raw materials has been fuelled by the insatiable demand from countries such as India and China. Worldwide economic growth and the industrialization of new regions has steadily fuelled the demand for raw materials. Canada has been a major beneficiary through the supply of base materials and petroleum based products. Despite the recent turmoil in worldwide financial markets, the exchange rate for the Canadian currency has maintained a resilient degree of strength. Certainly in terms of the US and Canadian money difference, the US monetary policy of currency debasement through reducing interest rates is contributing to the US dollar slide. This is partially offsetting any reduction in demand and the recent cut in Canadian interest rates by the Canadian central bank. Time will tell how much impact a slowing in global growth will have on the demand for Canadian materials and indirectly the CAD (Canadian Dollar).
Despite recent economic developments, it has been an opportune time for Canadian residents to travel. The high Canadian currency rates make overseas travel and holiday expenses considerably cheaper. This has also been an advantage for Canadian investors who looked to the US for foreign real estate purchasers. With the current sub prime crisis affecting the value of real estate, Canadian residents have had the opportunity to pick up cheap investment property.For US residents that want to gain exposure to possible appreciation of the exchange rate for Canadian currency, the Currencyshares Canadian dollar trust is an exchange traded fund that trades on the US market. Investors/traders can purchase units in this trust in the same way that you buy and sell securities in the stock market. US residents can also investigate the Commodity CD and World Energy CD at (www.everbank.com) which provides exposure to the Canadian dollar for 3 or 6 month terms, pays a rate of interest and is FDIC insured.
