Commentary: Canadian dollar dives on inflation report (The Globe and Mail)

Authors Avatar

In this article, the Canadian dollar has recently devalued when compared to the benchmark US dollar. The sudden devaluation stems from a low oil price, as well as the current lack of inflation within the Canadian economy. This occurrence, while positive now, will have differing effects in both the short term and the long term.  

In this situation, the exchange rate of the country’s currency is really being determined by the demand for our goods and services by external firms. Some firms would wish for the opportunity for future profit within the country, while others would like to buy our goods and services for a cheaper price than elsewhere. The fact that the issue was caused by the sudden devaluation of oil and lack of inflation indicates that both of these two forces are hindered within the trade system.

Join now!

The demand for Canadian oil has been going down, meaning that the current account, which is to say the value of our exports compared to our imports, is loosing value. It is because oil is a main export that the current account is being impacted so heavily and because of this loss, the demand for our currency which would be used to purchase that oil has gone down.

In comparison, the investing climate in the country suggests a change in the capital account, or the difference between the amount foreign firms has invested within our country and the ...

This is a preview of the whole essay