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Canada: Half Of CAD Appreciation DUE To USD Weakness‏

ByThe National Bank of Canada
Published 05/28/2012, 01:03 AM
Updated 05/14/2017, 06:45 AM

Blaming Western provinces for the strong Canadian dollar has become political sport lately, with talk of the Dutch Disease infecting Canada’s manufacturing sector. While it’s true that those factories still standing are being challenged by the strong dollar, the blame for that situation should probably be cast elsewhere ― more precisely, south of the border. As today’s Hot Chart shows, the trade-weighted US$ has depreciated 24% since its February 2002 peak, or 18% excluding the Canadian dollar. So half of the loonie’s roughly 36% appreciation versus the greenback since February 2002, can be attributed to US dollar weakness. While the USD seems to be showing signs of strength lately due to rising global uncertainty, this may not last. The Fed won’t admit to it, but a weak US$ seems to be its stealth policy given America’s increased dependency on exports (now at a record 14% of GDP), and the need to support prices in a slow US growth environment.
Canada Half Of CAD Appreciation DUE To US Weakness

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