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Future projected outlook of Canadian dollar

From 1841 to 1858 the currency of Canada has changed from the Canadian pound to the Canadian dollar. This happened so in the 18th and 19th centuries when the Spanish dollar was prevalent in the region of North America. However, the different governments that came into Canada tried to change the sterling system to different types of unit based systems. For example, Prince Edward introduced the Prince Edward Island dollar during the time period of 1871 to 1873. The value for this dollar in the Canadian dollar was $1. The Canadian dollar that is prevalent today is the unit system adopted in 1858. However, the Canadian dollar experienced a sharp decline and fell far from being at par with the U.S dollar. Nevertheless today, Canada has a stronger currency compared with the U.S. 1 Canadian dollar = 0.09798 U.S dollar.

The economists can now say that the Canadian dollar is the 7th most traded currency in the world. Their economy has been growing strong since 2007 due to the following contributing factors; the difference in the rates of Canada and the U.S, interest rate differentials, the world price of energy and finally, the price of non-energy commodities. Moreover, another reason that economists suggest for the gaining power of the Canadian dollar is due to the weakening of the fundamentals in the U.S. therefore, it can now be easily said that world countries are gaining strength against the U.S dollar.

Therefore the future of the currency looks bright. While it is important to keep in mind that the value of currency is determined by the market forces of demand and supply there could be numerous factors that could influence the value of the currency such as the interference of the government and the speculators. The main determinant of the currency is  economy and the balance of payments to the government.

Add to this the inflation trend of the Canadian economy. Now inflation is a very big force on the rate of the currency. If the Canadian inflation figures are considered, the inflation went down in the year 2009, showing that the Canadian Dollar became stronger. Source http://www.forexblog.org/category/canadian-dollar

However, the inflation rose steadily from 2009 onward. On first thought this may reflect that the currency was weakening but again, it is important to recall that the exchange rate is measured against other economies, and in this case the Canadian economy could still be better off than other economies it compared to and therefore this would mean that there would be a rise in the value of the Canadian Dollar against other currencies making it a good currency to invest in.

Moreover, the Canadian economy is a strong, stable economy which means that it can stand off the shocks of possible future recession. The interest rates that are offered by the banks are good and further contribute to the speculation that the Canadian Dollar is a good currency to invest in if you are looking for good returns. 

 

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Modified:12/30/2011
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