The exchange rate between the US dollar and the Canadian dollar has always been a topic of interest for investors and traders. The exchange rate is the value of one currency in terms of another currency. It fluctuates based on various factors such as economic growth, inflation, political stability, and interest rates. This article will discuss the recent trends in the exchange rate between the US dollar and the Canadian dollar.
History of the US Dollar to Canadian Dollar Exchange Rate
The US dollar and the Canadian dollar have been trading for over a century. The exchange rate between the two currencies has varied significantly over the years. The exchange rate was fixed at par in 1962, meaning one US dollar was equal to one Canadian dollar. However, the exchange rate was floated in 1971, and since then, it has been determined by the market forces of supply and demand.
Current Trends in the Exchange Rate
The exchange rate between the US dollar and the Canadian dollar has been fluctuating in recent years. In 2018, the exchange rate averaged around 1.30 CAD per USD. In 2019, the exchange rate averaged around 1.33 CAD per USD. In 2020, the exchange rate averaged around 1.35 CAD per USD. Currently, the exchange rate is around 1.26 CAD per USD.
Factors Affecting Exchange Rates
Several factors influence the exchange rate between the US dollar and the Canadian dollar. These factors include economic growth, inflation rates, political stability, and interest rates. The following paragraphs will discuss these factors in detail.
Economic Growth
Economic growth is a significant factor that affects the exchange rate between two countries. When a country's economy is growing, its currency tends to strengthen, and the exchange rate increases. This is because foreign investors are attracted to a growing economy, and they buy the country's currency, leading to an increase in demand and a rise in its value.
Inflation Rates
Inflation rates also impact the exchange rate between two currencies. When a country's inflation rate is high, its currency tends to weaken, and the exchange rate decreases. This is because high inflation erodes the purchasing power of a currency, making it less attractive to foreign investors.
Political Stability
Political stability is another factor that affects the exchange rate between two countries. When a country is politically unstable, its currency tends to weaken, and the exchange rate decreases. This is because political instability creates uncertainty, which scares off foreign investors, leading to a decrease in demand for the currency.
Interest Rates
Interest rates are also a significant factor that affects the exchange rate between two currencies. When a country's interest rate is high, its currency tends to strengthen, and the exchange rate increases. This is because high-interest rates attract foreign investors looking for higher returns on their investments.
Conclusion
In conclusion, the exchange rate between the US dollar and the Canadian dollar is influenced by several factors, including economic growth, inflation rates, political stability, and interest rates. The current exchange rate between the two currencies is around 1.26 CAD per USD. Investors and traders should keep an eye on these factors to make informed decisions regarding their investments.
Related video of US Dollar To Canadian Dollar Exchange Rate Trend