Pros of Canadian currency compared to US currency: Comes in several fun colours, and features the majestic loon.
Cons of Canadian currency compared to US currency: It’s less valuable, and dropping lower.
Driving the news: The Canadian dollar was trading at around six-month lows at market close yesterday and runs the risk of falling as low as US$0.71 per Monex Canada analysis.
- While that’s still a ways off from the loonie’s all-time rock bottom (an unbelievable 62 US cents back in 2002), it would be the lowest point since early on in the pandemic.
Why it’s happening: One big factor is that the loonie has failed to keep up with the surging US dollar. While the greenback isn’t Olympic powerlifter strong like it was last year, it’s rebounded over the past month from a slight decline, leaving the loonie to eat its dust.
- The issue could become more prominent if war spreads further in the Middle East. Major geopolitical turmoil often drives investors to store their money in so-called “safe-haven currencies” like USD, causing a knock-on effect for less powerful bucks.
Big picture: Canada’s economy also plays a role. If the economy enters a ‘technical’ recession, the interest rate hike cycle might come to a close. That’s bad news for the loonie, since higher rates tend to attract foreign investors, creating demand and boosting its value.