Forex Walkthrough

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.)



comments powered by Disqus
Trading Center