As the year comes to a close the Canadian economy faces a five-year low. Owing to the slump in the sale and purchase of crude oil which is one of the country’s largest exports, the Canadian dollar reached an all-time low. It depreciated by 0.5 percent, closing at $ 1.1534 per U.S. Dollar. This has been recorded as the weakest that the Canadian currency has reached since July 13, 2009.
What Are the Current Exchange Rates?
Following the trend across the international markets and the domestic situation in Canada, the conversion rates have been predicted to be around:
- The Pound Sterling to the Canadian Dollar is at 1.8384
- The Euro to the Canadian Dollar is at 1.4533
- Crude Oil Export – Financial experts have ascertained that the fall in the strength of the currency is owing to the declining profits of the crude oil business. As crude oil prices fell to about 20 per cent below the $80 a barrel mark, the International Energy Agency predicted that about a quarter of the Canadian producers needed to turn in a profit if they wished to stabilize the CAD.
- Unemployment – Economists have noted that it is not only the reduction in oil prices, but also the high unemployment rates that have affected the Canadian dollar. The labour market has been said to have lost over 9,000 jobs since June this year. This officially pushes the rate of unemployment up by 7.1%. Only 6 out of 16 sectors reported higher payrolls. This development comes despite their being a rise in full-time hiring. In addition to the construction sectors of the labour market, those at the manufacturing unit also suffered losses. The resultant leads to a severe decrease in momentum as far as providing jobs are concerned. Economists apprehend that with the fall in oil prices, the labour market might see a further depreciation.
Following the fall in the Canadian government bonds, the Bank of Canada has been compelled to release a statement that predicts a further drop in 2015. While the dollar stabilized over the week after the initial slump, the Bank has not ruled out a further depreciation. In fact, the lack of exporters as regards crude oil indicates that a full financial recovery is a good two years away. The Canadian economy could weaken further as the CAD/USD exchange rate is expected to fall to $1.18 in 2015. This could further slow the economic growth by as much as one-third of a percentage point. Coming at a time when unemployment rates are at an all time high, this news could potentially shock many of the Canadian citizens.
However, the Bank has also predicted that the weaker Canadian currency could broaden the economic recovery scheme. What this implies is that there might be an increase in the number of exporters that could potentially expand the economy by 2-2.5 per cent next year. This would solve the problem of indebted customers and could potentially prevent the correction in a housing market that is currently over-valued by 10-30 per cent.
Overall, however, the scenario in the global oil market has sapped the Canadian economy. Financial experts across the country are apprehensive of the year 2015 since they predict a further depreciation. Despite the marginal benefits of the weaker, the Canadian Dollar continues to be a major cause for concern in the country.