Canada’s national currency, the Loonie, has been trading high in recent months. When the Loonie goes up in value, it can be a sensitive topic for economists throughout Canada. A strongish Loonie is a good thing in a lot of ways. But remaining slightly below the US dollar and the British Pound is also very desirable. Canada is a big exporter of many products, and having a currency on par with buyers could hurt Canadian business. If Canadian goods become to expensive, basically, buyers may start to look elsewhere.
The Loonie has not been this high in value in over 5 years, since mid-2015. Right now, though, experts say that a stronger Loonie is no problem at all. In fact, it’s a good sign. For one thing, it points to a solid economic recovery after a difficult 2020. With third and fourth waves of the COVID-19 pandemic emerging in countries around the world, the economic outlook in many parts of the world is still uncertain. The fact that the Loonie has retained, and is even gaining, value is a positive one.
Exports remain one of the backbones of Canada’s economy. While the US has shifted more towards a knowledge-based economy, exports still account for about one third of Canada’s GDP. That’s about three times the volume of their neighbors to the south. Key exports for Canada include resources like lumber and oil. This resource-extraction side of the economy needs to remain strong for Canada’s GDP to stay solid. Lower prices due to a lower Loonie can help. But analysts say the Loonie is close to its sweet spot right now. They are not worried about its high, current value.
There are still anxieties in Canada over the border closure with the US. But Canada’s pandemic response has been overwhelmingly successful. In fact, the Bank of Canada was one of the first central banks in the West to dial back its pandemic-related measures. Canada’s economy has stayed strong and is expected to continue that way. Anxieties about the Loonie and the border may get clicks and sell papers. But Canada is doing well, overall.
