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The Canadian Dollar

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With the Canadian recovery gathering steam, the Canadian dollar has strengthened against the U.S. dollar during the last few weeks. Canadian three-month interest rates have risen above U.S. rates, a result of both the economic recovery and the Bank of Canada’s decision to increase overnight rates—presumably a response to strength in Canadian domestic demand. Because the U.S. federal funds rate has remained constant recently, the increase in the Canadian rate has boosted the differential between Canadian and U.S. short-term rates, supporting an immediate upward movement in the value of the Canadian dollar.

Suggested citation: "The Canadian Dollar," Federal Reserve Bank of Cleveland, Economic Trends, no. 02-05, pp. 09, 05.01.2002.

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