indicatorThe Owl

The loonie has lost ground to the greenback

The Canadian dollar has been below 75 cents US since September 20, 2022

By Rob Roach, ATB Economics 13 October 2022 1 min read

The value of the Canadian dollar vis-à-vis the US dollar has been on a downward trend.

At the start of the year, a Loonie was worth about 79 cents in US currency compared to about 73 cents as of early October.

The Canada-US exchange rate is sensitive to a lot of factors, two of which stand out at the moment.

First, there is the expectation that the US Federal Reserve will continue its “hawkish” stance and keep raising interest rates until inflation is under control. Higher US interest rates draw people to investments denominated in US dollars. This, in turn, tends to increase the value of the greenback compared to other currencies, including the loonie.

Second, US assets are often seen as a “safe haven” during times of heightened uncertainty. With the Russian invasion of Ukraine and recession fears in play, investors are leaning toward more reliable options like US Treasury bonds. The rise in demand for these US assets helps push up the value of the US dollar.

A weaker loonie is generally good news for Canadian exporters who exchange goods for US dollars and, in turn, can turn those US dollars into more Canadian dollars. The reverse is true for consumers and businesses buying US products.

Answer to the previous trivia question: According to the Egg Safety Council, the breed of the chicken determines eggshell colour with white hens usually laying white eggs and brown hens usually laying brown eggs.

Today’s trivia question: True or false? The common loon is Canada’s official national bird.

The Canadian dollar has been weakening against the US dollar

The Canadian dollar has been weakening against the US dollar

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