USD/CAD (U.S. Dollar/Canadian Dollar)
What Is the USD/CAD (U.S. Dollar/Canadian Dollar)?
USD/CAD is the shortening for the U.S. dollar versus Canadian dollar (USD/CAD) currency pair. The quote given for the USD/CAD currency pair lets the reader know the number of Canadian dollars (the quote currency) are expected to purchase one U.S. dollar (the base currency).
Trading the USD/CAD currency pair is otherwise called trading the "loonie," which is the name for the Canadian one dollar coin, which portrays its namesake bird. The USD/CAD is likewise one of the most liquid and actively traded pairs in the forex market.
Grasping the USD/CAD Currency Pair
The value of the USD/CAD pair is quoted as 1 U.S. dollar per X Canadian dollars. For instance, assuming the pair is trading at 1.20 it means that it takes 1.2 Canadian dollars to buy 1 U.S. dollar, or on the other hand that 1 CAD is worth $0.833 USD.
Albeit the USD/CAD currency pair has reached parity at various points ever (for example 1:1), the U.S. dollar has traditionally been the more grounded of the two currencies. The USD/CAD currency pair is actively traded as there are critical business ties between the two nations.
Factors that Affect the USD/CAD Currency Pair
The USD/CAD is impacted by factors that influence the value of the U.S. dollar as well as the Canadian dollar according to one another and different currencies. Hence, the interest rate differential between the Federal Reserve (Fed) and the Bank of Canada (BoC), will influence the value of these currencies when compared to one another. At the point when the Fed mediates in open market activities to make the U.S. dollar more grounded, for instance, the value of the USD/CAD cross will increase since it will take more Canadian dollars to purchase the more grounded U.S dollar.
The value of the Canadian dollar is additionally highly related with the price of commodities, particularly that of crude oil. Since the Canadian economy is intensely dependent on oil, the price of oil directs the state of the economy and the currency itself. Hence, the Canadian dollar is in many cases marked as a commodity currency.
USD/CAD and Parity
As referenced, the USD/CAD pair has seen its traditional relationship hit price parity. For instance, in the result of the Great Recession and the subsequent quantitative easing from the U.S. Federal Reserve, the Canadian dollar soared against the U.S. dollar to trade below parity, ultimately coming to 0.95. As a matter of fact, practically the examples of parity have been all connected with periods of U.S. financial difficulty or high oil prices — now and again both.
In 2016, in any case, oil prices drooped to decade-lows, trading below $30 a barrel. Thus, the Canadian dollar hit a record low, trading to 1.46. This implied it required 1.46 Canadian dollars to buy 1 U.S. dollar. As of August 2021, the USD/CAD rate is generally 1.25.
Highlights
- The USD has regularly been more grounded than the CAD after some time, in spite of the fact that it had arrived at parity of 1:1 momentarily following the Great Recession.
- This quote lets you know the number of CAD can be bought with one USD.
- USD/CAD is the currency pair for the U.S. furthermore, Canadian Dollars.
