The Bank of Canada left its key overnight rate unchanged at 4.25 per cent. The already surging Canadian dollar appreciated to 93 cents for the first time in 30 years (against the USD).The loonie is stronger than expected, or should I say the economy as a whole. The loonie merely reflect a strong Canadian economy and a crappy US economy. What does the current situation mean for the Canadian economy?
Well still, the exporters are being hit hard because their products aren’t worth as much given the rising dollar. However, it also means there will be a surge to innovate and become competitive in industries where some firms have ‘artificially’ competed due to the low dollar in the past.
Investment wise, and increase in the interest rate would actually appreciate (put pressure to at least) the Canadian dollar as Canadian investments become more appealing to purchase and therefore Canadian dollars are demanded more. More demand, less supply = appreciation of dollar.