why is the Canadian dollar becoming even weaker than the US dollar when Canada has lower inflation numbers?


If inflation devalues currency would it not make it that the dollar with the higher inflation numbers becomes cheaper relative to the currency with lower inflation? Why is this not the case with CAD and USD?

In: 2

Inflation is an internal measure for the most part. Exchange rate reflects the demand and supply in the market (domestic inflation will affect this but indirectly). If more people want US dollars, or Canada wants to export more, the CAD will go down; conversely it’ll go up.

Isn’t the CAD trading at .78:1? That doesn’t seem like it’s really getting weaker to me. Generally speaking, you’ll see more correlation between crude oil prices and the strength of the CAD vs USD, than any effects from inflation. Crude is trending up right now, so I wouldn’t be surprised to see the CAD rising, unless the mess in Ukraine screws up the market.

You may want to explain in what way and over what time period you think it is weaker. It seems pretty level right now and is almost exactly where it was a year ago vs USD.