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Chapter 18:
Financing
International Trade
Sell the Canadian Dollar says CIBC, as Others Eye Period of Consolidation
January 15, 2019
USD/CAD retreats further but is now "oversold" says CIBC, and tells clients to buy USD/CAD as others eye consolidation. GBP/CAD, EUR/CAD to decline says Scotiabank and Westpac
Canada's dollar has appreciated steadily this January, dragging the USD/CAD exchange rate down by -2.5%, as oil prices have begun to recover from last year's lows (oil prices matter for Canada because crude and its refined derivatives are the nation's largest exports (receipts)). However, the Canadian dollar is once again expected to depreciate, illustrating the constant rate fluctuations of the flexible exchange rate in contrast with the fixed exchange rate system.
Glossary
1. Appreciation
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An increase in a domestic currency's value in terms of another currency.
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2. Exchange Rate
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The price at which one currency can be purchased with another.
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3. Export (receipt)
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An international transaction in which a foreign currency is converted into a domestic one in order to purchase a domestic good; AKA receipt.
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4.Depreciation
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A decrease in a domestic currency's value in terms of a foreign currency.
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5.Flexible Exchange Rate
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An exchange rate for a currency that is determined entirely in the international market by demand and supply, with no government intervention; AKA floating exchange rate.
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6.Fixed Exchange Rate
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An exchange rate for a currency that is fixed in relation to another currency, such as the US dollar.
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