The Canadian dollar to USD is quite stable, but there are a few factors that can affect its value. Here are some factors of the Canadian dollar to USD.
1. The Price of Oil
The price of oil is enormous in the value of the Canadian dollar to USD. Canada is an outstanding exporter of oil. So when the price goes up, the Canadian dollar goes up too. If the price goes down, the Canadian dollar falls in value.
2. The Strength of the American Economy
The American economy is another factor in the value of the Canadian dollar to USD. When the American economy is strong, the Canadian dollar tends to be stronger. So, when the American economy is weak, the Canadian dollar falls in value.
3. The Strength of the Canadian Economy
Just like with the American economy, the strength of the Canadian economy also has an enormous impact on the value of the Canadian dollar to USD. When the Canadian economy is doing well, the Canadian dollar is sturdy. Conversely, when the Canadian economy is weak, the Canadian dollar falls in value.
4. The USD Canadian Dollar Exchange Rate
The last factor that affects the value of the Canadian dollar to USD is, of course, the exchange rate between the two currencies. If people want to trade their dollars for the looniest then it pushes up the value relative to the dollar. Conversely, if nobody wants their dollars for loonies, the Canadian dollar falls in value.
Now that we’ve reviewed four factors outside of the Canadian dollar to the USD pair’s control. Let’s take a look at how it is affected by its internal mechanics.
The interest rates set by the Bank of Canada (BOC) and the Federal Reserve (the Fed)
– The BOC sets the interest rates on the Canadian side, and they can affect a lot of things. For example, more attractive borrowing rates encourage people to use more credit which stimulates the economy. It is reliable for trade with America because more Canadians will buy American products.
The amount of debt that each country owes to other countries
– If one country owes a lot of money to another, it usually needs to use its future earnings to pay off the debt. And this takes away from other sectors of their economy. Since trade with America is so important for Canada’s economy, anything that hurts the American economy will hurt Canada’s too.
The total amount of exports and imports between both countries
– When Canada exports more goods to America than they import, it means that they are running a trade surplus with America. It is advantageous for the Canadian dollar because more people want to trade in their loonies for dollars. Conversely, if Canada imports more goods from America than they export, it means they are running a trade deficit with America. It is unfortunate for the Canadian dollar because it means more people want to trade in their loonies for dollars than vice versa.
The Canadian dollar to USD is a very stable currency pair, and many factors affect its value. It will continue to be a strong currency as long as the American and Canadian economies remain strong. However, it is always important to monitor the external factors that may affect its value. Thanks for reading!