Finance
Canadian Dollar Hits a 4 Year Low Against The Greenback
The Canadian Dollar (has recently plummeted to its lowest level in over four and a half years. Trading at approximately 1.42 CAD per USD as of Friday. The sharp decline has raised concerns among investors and businesses.
After hitting its lowest intraday level since April 2020 at 1.4244, the loonie was trading 0.1% lower at 1.4230 per US dollar, or 70.27 US cents. The currency saw its third consecutive weekly decrease, down 0.5%.
Investors’ outlook for the Canadian dollar has been bleak. The historically high bearish bets against the Loonie indicate a lack of optimism for the currency’s immediate rebound.
Bond yield spreads are one factor contributing to this pessimism. The USD has benefited from the widening difference between Canadian and US bond yields. The Loonie has weakened further as Canadian bonds have struggled to draw interest due to higher yields offering greater returns in the US.
The declining value of the Loonie has practical repercussions for Canadians. A lower CAD makes importing goods and raw materials more expensive for firms. Customers may pay more as a result, which would increase inflation.
The declining currency value will affect those who intend to travel or study overseas, reducing their purchasing power. However, a more competitive exchange rate might help exporters, although this bright spot seems insignificant in light of the larger economic difficulties.
For Canadians, it’s a mixed bag, with uncertainty having a greater negative impact.
Prime Minister Justin Trudeau’s government is coming under increasing fire for handling economic problems, such as record unemployment and skyrocketing public debt. Critics contend that the economy is now susceptible to external shocks due to inadequate budgetary actions.
Although the Trudeau government claimed to have taken action to combat unemployment, many people think these purported initiatives have not been successful.
Consumer confidence has fallen to an all-time low, and job creation is still slow. As a result, domestic demand has stagnated, worsening the Canadian economy’s problems.
The Trudeau government risks extending this downturn unless drastic policy adjustments are made. Trudeau’s response may determine the direction of the Canadian dollar in the upcoming months.
In the interim. Some analysts already believe the government exceeded the deficit cap, and the parliamentary budget officer has predicted that the Liberals’ fall economic update on Monday would reveal a larger-than-promised deficit of $46.8 billion.
The Global and Mail received a leak from Finance Minister Chrystia Freeland’s office estimating the budget shortfall to be around $60 billion.
Ms. Freeland’s relationship with the Prime Minister’s Office has soured due to higher expenditure, making it challenging to reach the $40.1 billion deficit target she pledged in Monday’s fiscal and economic update.
In April, she set three self-imposed “fiscal guideposts” for her government, including keeping the deficit at or below that amount.
The Globe and Mail reported that Trudeau and Freeland disagree on spending. The government’s $6.28-billion plan for a holiday sales-tax break and $250 payments for those making up to $150,000 has angered her office and the nonpartisan Finance Department.
