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April 15, 2010

Canadian Dollar worth more than American

CANADA - Yesterday the Canadian dollar closed at 100.08 cents US, up .27 of a cent from Tuesday. This is the first time in two years the Canadian dollar has passed over parity.

On November 7th 2007 the loonie hit $1.1024 USD, a modern day. Economists won't predict whether we see valuation that high again in the near future, but I'll take a stab at it: I think it might go as high as $1.05 or $1.07 US before it settles back down again.

The reason is because Canada's economy has been virtually uneffected by the recession compared to other major G7 countries. Canada's GDP is growing and the brief recession Canada had only lasted from the fall of 2008 to the summer of 2009 and was only a brief 3.3% drop in GDP and a 1.8% increase in unemployment.

Compared to previous recessions in 1981-82 (down 4.9% GDP over six quarters and 5% increase in unemployment) and 1991-92 (down 3.4% GDP over four quarters and 3.2% increase in unemployment) this was a relatively SMALL recession both in terms of effect and length.

In contrast however the United States has suffered way more than Canada did, resulting in the U.S. dollar to lose a lot of its value in recent years as the Euro and other currencies steadily gain. The USA has had a lot of anxiety over its banking and automotive industries, whereas Canada is more of a resource based economy (oil, minerals, lumber, etc) which is always in high demand.

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