Canadian Dollar was overvalued at $1.00

Foreign Exchange Traders are scrambling for reasons why the Canadian Dollars and Australian Dollars exchange rates are so weak. One idea is that carry-traders are feeling risk averse and reducing activity. Another idea, and one we like better, is that commodity prices are falling, whether we want to see it as bursting bubbles or not. Behind the drop in commodity prices is slowing demand from the US (affecting the CAD) and from China (affecting the AUD). Bloomberg notes that 54% of Canadian exports are commodities such as gold and oil, and the rest of the economy is dependent on the US, too. Canada’s growth will be only 1-1.5% this year, less than the US.

The Canadian Dollar was overvalued at $1.00 and still overvalued at 98 cents.