Exchange rates
Why does the Canadian dollar go up or down?
2 min read
A floating exchange rate
Since 1970, Canada has let its dollar float: its value isn't set by the government, it comes from supply and demand on currency markets. The Bank of Canada publishes a daily average exchange rate every business day so you can follow it.
The four big factors
Factor | Usual effect on the Canadian dollar |
|---|---|
Canadian interest rates higher than US rates | Tends to push it up |
Rising oil and resource prices | Tends to push it up |
A strong US dollar around the world | Tends to push it down against the US dollar |
Market or global economic worry | Tends to push it down |
Interest rates
The Bank of Canada sets its policy interest rate. When Canadian rates are more attractive than US rates, so are investments in Canadian dollars, which supports the currency. The reverse is also true.
Natural resources
Canada exports a lot of oil, gas, metals and farm products. When their prices rise, foreign buyers need more Canadian dollars to pay for them.
The US dollar
Much of world trade happens in US dollars. When it strengthens against all currencies, the Canadian dollar often falls against it, even if nothing changed in Canada.
The economy and confidence
Jobs and inflation numbers, trade relations with the US and periods of crisis also move the currency, sometimes sharply.
What it means for you
The same trip can cost more or less depending on when you buy your currency.
Currencies pegged to the US dollar (Bahamian dollar, UAE dirham) move exactly like it against the Canadian dollar. See Caribbean and Gulf currencies.
No one predicts rates reliably. Rather than hunting for the "right moment", read our advice on when to buy foreign currency.
Follow our today's rates, updated throughout the day.
Frequently asked questions
Does the Bank of Canada step in to support the dollar?
It doesn't target the exchange rate. Its mandate is inflation; its rate decisions do influence the currency, though.
Is this financial advice?
No. It explains general mechanisms and isn't investment advice.
About the author
ClickExchange
ClickExchange team
