Canada Confirms Dollar Too Overvalued

  November 26th, 2007 at 13:29, Andriy Moraru

Canadian DollarCanadian Prime Minister, Stephen Harper, confirmed yesterday that his vision of latest CAD’s fast and strong appreciation against USD coincides with the opinion stated by Canada’s Financial Minister Jim Flaherty. The surprisingly high strengthening of Canadian currency bears highly speculative nature and is essentially harmful to the Canada’s economy.

Canada already felt the effect of its currency appreciation as the retail sales and factory orders showed  a worse than expected growth. Canada’s exporting nature of economy depends on low rated Canadian dollar, while spiking growth of the national currency, which recently hit its historical records against U.S. dollar, brings worries and dangers as the canadian exported goods become less competitive in value.

Interest rates cut could one of the probable consequences of the recent speeches by Canada’s government figures. The rise of the global volatility drives traders from high risk assets to the low risk treasury notes, which in its turn drives the yields of those notes down. Canadian bonds’ yield is now reaching its monthly minimum values below 4.0%. Given an overvalued currency, low bonds’ yield interest and possible economical slowdown, Canadian Central Bank will probably lower the interest rates by 25 basis points during its next meeting on December 4th.

If you have any questions, comments or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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