The Canadian dollar, commonly known as the loonie, holds so much potential to be one of the major stars in the global financial stage. This fact is a vital piece of information for forex traders who are in search of new potentials in currencies.
It will be good to take a look at the significant factors that make the Canadian Dollar strong today (and why it won’t stop on its already impressive feats).
Canadian Dollar’s Ranking
First, the Canadian dollar is one of the seven currencies that dominates 80% of the volume in the Forex market. Second, it is also the world’s 5th most held currency reserve, which again, is another great feat.
Can Still Impress Despite Limitations
Many will undoubtedly take a second look at the Canadian Dollar’s currency ranking because it appears somehow unusual. Despite the impressive currency ranking, Canada’s economy only places 10th worldwide.
Canada is also one of the major economies in the world with low population. But despite these limitations, the Canadian dollar clearly shows that it can impress and deliver.
Risk Reduction Policies
Canada has experienced high inflation rates, but the country has been able to wrestle with it. As a clear outcome of their tight policies, Canad has been able to lower budget deficits, inflation rates, and inflation as a whole.
Their strict policies include improved current account balance and better fiscal policy. With these impressive managements, it has placed the country on a safe and competitive spot on the global market.
Exposure to Commodities
When looking at Canada’s economic movements, it’s also essential to look at what’s happening on its commodity market. Canada produces highly-important commodities such as minerals, petroleum, grains, and wood products. The movements of these commodities can influence traders’ and investors’ outlook on the Canadian dollar.
Policy, People, and Demographics are Pro-Economy
Canada’s population age is quite high when compared to the world standard. But the contrast reverses when it is compared to developed economies.
The country also boasts a liberal immigration policy and demographics that will not threaten the growth of its economy.
Financial Market Structure
Canada has a strict financial market structure that has enabled it to avoid bad mortgage problems that backfired on the economy of the U.S.
Magic Middle Path
A middle ground that so many countries have struggled to achieve has now been ‘perfected’ by Canada. What we’re talking about is its balanced fiscal management and its ability to find a workable middle path between a more hands-off approach and a state-dominated economy.
The strength of this balancing act can be clearly seen during a global economic shake-up. And if this catastrophe ever happens, Canada has the power to withstand its impacts.
Conclusion
With all the assets it holds, the Canadian dollar can be a viable alternative to the US dollar. Thanks to the impressive management of Canada, the Canadian dollar continues to climb into significance. Forex traders should take a serious look at the loonie as it holds so much potential to become one of the world’s top currencies.
