With its continued strong performance against its neighbor
to the south, the Canadian Dollar is almost defying logic, having jumped to
99cents against the USD in a matter of days. In purchasing power parity terms, the Loony is already among the most
expensive in the world. However, achieving
parity (i.e. an exchange rate of 1:1) has a psychological value that can’t be
cast in economic terms. Plus, it doesn’t hurt that high commodity prices have
helped Canada to maintain
years of strong growth and become America’s largest trading partner
in process. And after the Fed chopped 50
basis points off of the US Federal Funds Rate, the Canada-US interest rate
differential is virtually non-existent. One commentator thinks a 1:1 exchange
could provide a basis for more economic cooperation between the two nations. The Globe and Mail reports:
“Parity is a very normalized level. Our [US and Canada] economies
have become so closely intertwined that I think down the road what you’re
thinking about is more of a North American bloc.”
Read More: A call for parity doesn’t look so loony now
Original post by Jimmy Atkinson and software by Elliott Back
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