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Monthly Economic Letter
October 2022What's going on with the Canadian dollar?
The Canadian dollar has been in free fall recently, dropping to around US$0.73. The last time the Canadian dollar was this weak was two and a half years ago at the start of the pandemic. A low Canadian dollar relative to the U.S. dollar favours exports at the expense of imports, which could be good news in the current economic climate.
The exchange rate between the Canadian dollar and any floating foreign currency is determined by the forces of supply and demand. The foreign exchange market, like any other market, reflects expectations about future developments. And like other markets, such as the stock market, it’s highly volatile and notoriously difficult to predict.
However, certain indicators such as commodity prices, the difference between Canadian and U.S. short-term interest rates and the level of stock market volatility can give us an idea of where the loonie’s value is headed in the weeks ahead.
Read the full letter here