Forex Walkthrough

AAA

Level 5 Economics - Canadian Dollar

Canadian Dollar (CAD)
Central Bank: Bank of Canada (BoC)
Current Interest Rate: Link here

The "Loonie"
Established by the Bank of Canada Act of 1934, the Bank of Canada acts as the central bank whose aim is to "focus on the goals of low and stable inflation, a safe and secure currency, financial stability, and the efficient management of government funds and public debt." As an independent entity, Canada's central bank draws many similarities with the Swiss National Bank because it is sometimes treated as a corporation, with the Ministry of Finance directly holding shares in the bank. Despite the possibility of a conflict of interests, it is the responsibility of the governor to maintain price stability at an arm's length from the current administration, while seeking to simultaneously consider the government's concerns. With an inflationary benchmark that usually hovers between 2-3%, the BoC has been known to behave hawkishly rather than accommodative when it comes to any deviations in prices.

In line with the other major currencies, the Canadian dollar (CAD) tends to trade in similar daily ranges of 30-40 pips. However, one unique aspect of the currency is its relationship with crude oil, since Canada remains a major exporter of the commodity. For that reason, many traders and investors use this currency as either a hedge against current commodity positions or for pure speculation, tracing signals from the oil market. (Read more about the CAD's relationship with oil in Commodity Prices And Currency Movements.)

Australian/New Zealand Dollar


Related Articles
  1. Forex Education

    Top 8 Most Tradable Currencies

    Currencies can provide diversification for a portfolio that's in a rut. Find out which ones you need to know.
  2. Economics

    Canadian Dollar Continues To Drop, But Why?

    The Canadian dollar-US dollar exchange rate is positively related to oil prices partly due to crude oil's big share of Canada's total FX currency earnings.
  3. Stock Analysis

    Is Now the Right Time to Buy Canadian Stocks?

    Learn about the Canadian stock market and why it has declined over the past five years. Understand if now is a good time to invest in Canadian stocks.
  4. Stock Analysis

    Looking for Good Investments in Canada? Try These Stocks (BAM, CTC.A)

    Discover why investing in Canadian stocks makes sense and which Canadian companies to invest in even with oil prices at multi-year lows.
  5. Economics

    Why Canada's Interest Rates Won't Rise Anytime Soon

    Learn why the Bank of Canada is unlikely to raise interest rates anytime soon despite concerns about a housing market bubble and rising debt levels.
  6. Forex Fundamentals

    Top 6 Most Tradable Currencies

    Here are six currencies that can diversify your portfolio.
  7. Investing Basics

    Toronto Stock Exchange: Safest Investment In The World?

    Canada, one of the wealthiest countries, is also one of the safest places to invest.
  8. Personal Finance

    U.S. Or Canada: Which Country Is Best To Call Home?

    There are unique benefits to living both above and below the 49th parallel. Find out which of these great nations best suits your value system.
  9. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Canada

    Learn specific information about three of the most popular and best performing ETFs that offer exposure to Canadian equity markets for U.S. investors.
  10. Investing

    Fundamentals Of How Canada Makes Its Money

    In terms of industry, Canada is best known for oil and gas production, but the second largest country in the world has quite the diversified economy.
RELATED TERMS
  1. Bank Of Canada - BOC

    The central bank of Canada, that came into existence after the ...
  2. CAD

    What currency is CAD? CAD is the currency abbreviation or currency ...
  3. Big Five Banks

    A reference used in Canada to describe Royal Bank, The Bank of ...
  4. Investment Canada Act - ICA

    A piece of legislation designed to provide for the review of ...
  5. Monetary Conditions Index - MCI

    A measure of monetary conditions in the Canadian economy, giving ...
  6. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
RELATED FAQS
  1. Who decides to print money in Canada?

    Discover how the Bank of Canada and chartered banks in the country can create new money, and how creating new money causes ... Read Answer >>
  2. How does the landscape of the financial services sector in the U.S. compare to Canada?

    Read about the financial services sector in the United States and Canada, two countries that represent each other's largest ... Read Answer >>
  3. How are foreign exchange rates affected by commodity price fluctuations?

    In the foreign exchange (forex) market, currency valuations move up and down as a result of many factors, including interest ... Read Answer >>
  4. How can I get 100k in a Canadian bank to a U.S. Investment firm with minimal loss ...

  5. Why did Target's (TGT) expansion into Canada fail so quickly?

    Read about the four major reasons Target's expansion into Canada ended so abruptly and quickly after expanding into northern ... Read Answer >>
  6. Are Canadian Pension Plans inflation-protected?

    Learn about the Canada Pension Plan and how it adjusts its contributions and benefits each year for changes in inflation ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center