![]() at a time when energy prices and Canadian exports were rebounding. This significantly reduced the target interest rate difference between Canada and the U.S. In response, the Bank of Canada lowered its target interest rate from 3% in October 2008 to a historic low of 0.25% in April 2009 and maintained it at that level until May 2010. As a result, by early 2009, most world currencies, including the Canadian dollar, had lost most of their pre-2008 gains against the U.S. As the negative impact of the related 2008 financial crisis spread to other economies, the resulting economic slowdowns and contractions triggered sharp declines in both energy prices and the U.S. Federal Reserve Bank reduced its target interest rate from 5.25% to an unprecedented level of 0% to 0.25% in December 2008. In response to the 2007 housing market crash, in September 2007, the U.S. dollars due to rising energy prices and strong U.S. What Explains the Recent Performance of the Canadian Dollar?įrom January 2002 to November 2007, the Canadian dollar increased from a low of 62 cents U.S. For example, if productivity in Canada were to grow faster than in the United States, the prices of Canadian goods would become more competitive and, over time, Canadian output and exports would increase, leading to greater demand for Canadian dollars.
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