Canadian economy is in the money once again
The Canadian dollar strengthened against the backdrop of rising oil prices. Why is this good for the country's residents?
On Monday, the Canadian dollar strengthened to almost a six-week high against the US dollar thanks to rising oil prices. This offset the decline in manufacturing activity in the country observed at the end of last month. Now, the Canadian economy, which is already reliable and viable, is back in the black.
The price of oil, one of Canada's main export commodities, showed its largest daily gain in almost a year after OPEC unexpectedly announced production cuts.
The prices of American oil rose by 6.2% to $80.39 per barrel, while the Canadian dollar strengthened by 0.5% to 1.3442 against the US dollar, or 74.39 US cents, reaching its highest level since February 21st.
For reference: the strengthening of the national currency means that its purchasing power increases compared to other currencies. This occurs when the demand for the national currency exceeds its supply, leading to an increase in its value.
Economists usually have a positive assessment of this phenomenon. The unequivocal advantages of strengthening the national currency include:
- Increased purchasing power of the population. Residents of the country can buy more imported goods for national currency.
- Reduction in inflation: price growth in the country decreases or stops altogether. The population is once again in a winning position.
- Attraction of foreign investors. Foreigners invest more in the national currency of the country, as its growth brings them income.
- Increase in financial stability. The sum of the three factors listed above makes the country's economy more reliable and protects it from risks on international markets.
- Increase in the competitiveness of local producers. They can purchase imported raw materials advantageously and produce more attractive goods for the domestic market and for export.
Earlier this month, the Bank of Canada managed to leash inflation.
