While other commodities matter to the Canadian dollar, none of them matter as much as the price of oil. So, the exchange rate is often very sensitive to changes in the price of oil, with the value of the Canadian dollar going up as oil prices go up and vice versa. Since Canada is a huge net exporter of oil, an increase in the price of oil will drive up the demand for the Canadian dollar for those who want to buy our oil (most of which goes to the US). The price of commodities, especially oil, matters a lot to the Canadian dollar.
For example, if the Bank of Canada makes an announcement that hints at raising rates, the Canadian dollar will generally move up. Nonetheless, the first principle is that investors prefer higher rates to lower rates when it comes to choosing currencies. The determination is further complicated by the fact that investors adjust for inflation expectations when comparing interest rates. Of course, interest rates are not static and investors take into account not just the current rates of interest but also expected future rates of interest, as reflected in the yield curves of the two countries. As such, all else equal, the currency offering the higher interest rate is preferred and the relative difference in interest rates is watched closely. Investors prefer to hold assets in the currency with the highest return. The level of current and future expected interest rates in Canada and the US are important to the exchange rate. USD to CAD forecasts generally attempt to determine the future of the exchange rate based on the factors that are known to affect the USD to CAD exchange rates. The exchange rate is watched closely by policy makers and businesses and analyzed by hundreds of analysts around the world.
0 kommentar(er)
