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The Canadian dollar resumed its weakening trend in 2000 and 2001, and touched an all-time low of US$0.6179 on 21 January 2002. Through much of this period, the U.S. currency rose against all major currencies, reaching multi-year highs, supported by large private capital flows in the United States owing to continued robust U.S. growth and further strong productivity gains. A decline in commodity prices in 2001, caused by an abrupt slowdown of the global economy, led by the United States, also undermined the Canadian currency. In addition, markets were temporarily roiled by the terrorist attacks in the United States on 11 September.
June 1970-present | Views: 677 | Added by: gogoshvab | Date: 2010-02-20

While the Canadian dollar began the 1990s on a strong note, it weakened against its U.S. counterpart through much of the decade, declining from a high of US$0.8934 on 4 November 1991 to close the decade at US$0.6929.

Through 1990 and most of 1991, the Canadian dollar climbed against its U.S. counterpart (and against major overseas currencies). This was largely due to a further tightening of monetary policy within the context of inflation-reduction targets announced in February 1991, and widening interest rate differentials that favoured Canadian instruments.

June 1970-present | Views: 737 | Added by: gogoshvab | Date: 2010-02-20

Throughout the 1980s, the Canadian dollar traded in a wide range, weakening sharply during the first half of the decade, before staging a strong recovery during the second half. Early in the period, the Bank’s policy was to moderate the effects of large swings in U.S. interest rates on Canada, taking some of the impact on interest rates and some on the exchange rate (Bank of Canada Annual Report 1980). For the Bank to react in this way, it needed more flexibility, and in March 1980, the Bank Rate was linked to the rate for threemonth treasury bills, which was established at the weekly bill auction. Canadian short-term interest rates rose sharply through 1980 and into the summer of 1981, with the Bank Rate touching an all-time high of 21.24 per cent in early August 1981, before moderating through the remainder of the year. At the same time, the Canadian dollar came under significant downward pressure. Important factors behind its depreciation included political concerns in the lead up to the Quebec referendum in May 1980, weakening prices for non-energy commodities, and the introduction of the National Energy Program by the federal government in October 1980, which prompted a wave of takeovers of foreign-owned firms by Canadian-owned firms, particularly in the oil sector. By mid-1981, policy-makers became concerned that the exchange rate slide would begin to feed on itself. Consequently, the minister of finance asked the chartered banks to reduce their lending to finance corporate takeovers that would involve outflows of capital from Canada.
June 1970-present | Views: 618 | Added by: gogoshvab | Date: 2010-02-20


 
Immediately following the government’s announcement that it would allow the Canadian dollar to float, the currency appreciated sharply, rising roughly 5 per cent to about US$0.97. It continued to drift upwards through the autumn of 1970 and into 1971 to trade in a relatively narrow range between US$0.98 and US$0.99. By 1972, the Canadian dollar had traded through parity with its U.S. counterpart. It reached a high of US$1.0443 on 25 April 1974.
June 1970-present | Views: 678 | Added by: gogoshvab | Date: 2010-02-20

Rising domestic inflation led to the establishment of the Prices and Incomes Commission in 1968 and to the introduction of a restrictive stance on monetary policy. This occurred at a time when the United States was pursuing expansionary policies associated with the Vietnam War and with a major domestic program of social spending. Higher commodity prices and strong external demand for Canadian exports of raw materials and automobiles led to a sharp swing in Canada’s current account balance, from a sizable deficit in 1969 to a large surplus. Combined with sizable capital inflows associated with relatively more attractive Canadian interest rates, this put upward pressure on the Canadian dollar and on Canada’s international reserves. The resulting inflow of foreign exchange led to concerns that the government’s anti-inflationary stance might be compromised unless action was taken to adjust the value of the Canadian dollar upwards. There was also concern that rising foreign exchange reserves would lead to expectations of a currency revaluation, thereby encouraging speculative short-term inflows into Canada.
June 1970-present | Views: 730 | Added by: gogoshvab | Date: 2010-02-20