An Analysis of the Value of the Canadian Dollar between 2000 and 2005

An Analysis of the Value of the Canadian Dollar between 2000 and 2005

Outline
Canada is considered to be a country with a stable economy and good perspectives of sustained and long-termed development. One of the main indicators of the economic stability and high perspectives is the national currency, Canadian dollar, and its value.
On analysing the value of the Canadian dollar within the last five years from 2000 to 2005, it is necessary to take into consideration several factors influencing its value. First of all, it should be said that the process of economic globalisation plays an important role in the value of the Canadian dollar since it contributes to Canada’s integration in the world economy and creates new opportunities for Canadian companies to enter new markets, increase its export, and, consequently, strengthen national currency.
At this respect, the active participation of Canada in NAFTA should be pointed out since it involves Canada into free trade with the countries members of this organisation and such a situation produces a positive impact on the development of the Canadian economy at large and increase the value of the Canadian dollar in particular.
Probably one of the most important factors influencing the value of the Canadian dollar is its trade and cooperation with the US. Not surprisingly that there are common trends in the Canadian American trade and the value of the Canadian dollar. It should be pointed out that in the period from 2000 to 2005 the trade balance of Canada with the US constantly remained positive and the lowest point is +67,975 million US dollars but since 2004 it has started to grow dramatically and constituted +92,492 million US dollars. At this respect it is quite noteworthy to trace the dynamics of the value of the Canadian dollar, which also has risen dramatically from a value of $0.6568 in December 2000 to $0,8613 in December 2005. In such a situation it the interdependence of the trade balance and Canadian export, on the one hand, and the value of the Canadian dollar, on the other, is obvious.
Another important factor that influences the value of the Canadian dollar is the development of Canadian industries. However, their impact on the value of the Canadian dollar is predetermined by the fact that basic Canadian industries their depend on exports, the degree to which they face competing imports at home and the extent to which the imported inputs are used. In such a situation, the increase of the value of the Canadian dollar compared to 2000-2004 is predetermined by the growth of exports, positive trade balance, and development of export-oriented industries.
Thus, the value of the Canadian dollar, being relatively stable, in recent years, notably in 2004 has grown quite significantly. Basically it is predetermined by the situation in the international trade and active cooperation and trade of Canada with its geographic neighbour, the US, as well as other foreign countries. At the same time, it makes the value of Canadian dollar, as well as its basic industries to dependent on the situation in foreign markets and international trade.


Bibliography:
1. Canadian Broadcast Corporation, “Economy Expected to Grow 3.2 Percent in 2006: Royal Bank,” found at http://www.cbc.ca/story/business/national/2005/economy.htm, retrieved Feb. 14, 2006.
2. Canadian Broadcast Corporation, “Big Three Market Share Rebounds in Canada; Slips in U.S.,” found at http://www.cbc.ca/story/business/national/2005/economy.htm, retrieved Feb. 14, 2006.
3. Organization for Economic Co-operation and Development (OECD), “Main Economic Indicators 2005,” Apr. 2005, found at http://lysander.sourceoecd.org/vl=7640236/cl=65/nw=1/rpsv/ij/oecdjournals/04745523/v2005n4/s1/p1l, retrieved Feb. 14, 2006.
4. Warren, Adrienne. “NAFTA Quarterly,” Scotiabank Group, winter 2005.