From the Canadian dollar’s viewpoint, it looks like global growth is slowing down drastically. The CAD dropped in value again early on Tuesday, March 6th, bringing it to a weekly low point. The biggest factor in this pullback is probably the global economy. With fears once again growing about a Greek default and China scaling back its economic growth goals, the rest of the world is likely to feel the repercussions. This is especially true in relation to the U.S. dollar. Because this currency seems like the best of a bunch of bad options, other currencies are having their values drop because of people flocking to the USD. The global macroeconomic issues that are influencing worldwide trade, it would appear, are going to hammer the CAD fairly hard.
The CAD stood at $0.9982 in comparison to the dollar. This is the lowest level it has been at since February 27th. Canadian financial experts are not concerned about this drop, however. According to some experts, the CAD is still in an upward moving price channel. The fact that it is dropping a little bit should not be regarded as a deviation from this trend, these people say. The price channel has given the CAD a bit of room to oscillate within and these folks say that the Canadian dollar will bounce back. After all, the Canadian economy is not in the same condition as Europe’s nations are.
As proof of this, the Canadian two year bond prices have increased by 3 cents (CAD). Their yield is now at 1.104 percent. Ten year bonds’ yields went up 29 cents (CAD) to 1.946 percent. Investor confidence is likely the cause behind this increase in yield.
Further evidence shows that the Canadian dollar setback should be taken with a grain or two of salt. The three month price chart USD/CAD shows a definite drop in the U.S. dollar’s price. In fact, the CAD is much closer to its 52 week high than it originally was three months ago. The U.S. dollar’s price over the last year has fluctuated between 0.9844 and 1.0524. This shows that the CAD is still sitting strong in regards to the USD.
With the global marketplace struggling, investing in a safe currency is often a good idea. But when that safe currency is clouded by a dropping stock market and high unemployment rates, as the United States currently is, other currencies might prove to be a beneficial trade. The Canadian dollar has proven that it is a strong currency, despite not being one of the four major currencies. Still, if you are looking for a safe harbor and are unsure of where the USD is headed, the CAD has shown a lot of promise over the last year.