Canadian Dollar Essay

1186 Words Nov 17th, 2015 5 Pages
The Canadian Dollar
The Canadian dollar has seen its ups and downs compared to the US dollar for many years. This summary will go over the trends and causes of the shifting exchange rates of the Canadian Dollar and its impact on export and import of Canadian goods. It will also go over what could possibly be done to level out the decline of the Canadian Dollar and what the expectation is for the Dollar in the next five years.
15 Year Trend between the Canadian and the US Dollar
In the last 15 years the Canadian dollar has gone from being lower than lesser than UD dollar to almost equivalent and for a period higher to back to lesser than US dollar. In 2000 1 CAD was equivalent to 0.673519 USD; it continued downwards until around 2003
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(Elam, 2015). Also take into account the $17.4 billion deficit which is being financed by unstable loans, Canadian corporations have had an outflow of $37 billion dollars in foreign investments which stunted the inflows into Canadian securities (National Bank, 2015). Combine all these factors and it leads to a dropping Loonie.
Effect on Canadian Exports to the US
When the CAD weakens importers of other countries are more likely to buy goods thus making the export industry in Canada rise. This is because compared to a strong CAD which makes it more expensive to buy Canadian goods, a weak one allows for larger purchases from economies that are stronger such as the US (Blackwell et al, 2014). Sept 30, 2015 the exchange rate is at 1 CAD to 0.74 USD which means it is cheaper for the States to purchase form Canada. For example when 1 CAD was equivalent to 1.011 USD (in 2011) there was a reduction in exports to the US like lumber. However now with 1 CAD to 0.74 USD the lumber exports to the US have risen considerably.

Effect on Canadian Imports to the US
While the dropping Loonie is good for exporters that isn’t the same for importers. With the dropping Loonie it has become more expensive to buy American goods for consumers as well as businesses. Around 2011 people were going across the border to shop on a regular basis, companies who normally purchased goods within Canada found it cheaper to buy them in the States. At one point it was the

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