Does the Canadian dollar rally have room to run? – MENAFN.COM

SectorFinancial Markets

The Bank of Canada explicitly identified a higher dollar as an adverse risk to its base case in the January Monetary Policy Report. This was the first time since July 2011 that the central bank has made such a statement. Back then, our dollar was at parity with the US dollar and oil prices were above US$100 per barrel.

While a strong dollar is good for importers and international travellers, it’s a negative for Canadian exporters to the US destination for over 75 percent of Canadian exports. The exchange rate between the Canadian dollar and any floating foreign currency is determined by the forces of supply and demand. The foreign exchange market is like any other asset market—expectations about the future are important. And like other asset markets, including the stock market, foreign exchange movements are notoriously difficult to predict. However, there are some indicators that have historically been useful in trying to forecast currency fluctuations. For the Canadian dollar, more...