Is USD Stronger Than CAD In The Long-Term?
USD/CAD exchange rate forecast for 2024-2025
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JP Morgan - 1.37 (2024) and 1.33 (2025)
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Exchangerates.org.uk - 1.35 (2024) and 1.30 (2025)
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WalletInvestor - 1.33 (2024) and 1.36 (2025)
Historically, US dollar has generally held greater strength than its Canadian counterpart. However, whether this phenomenon is going to continue in the year 2024 is becoming a rather popular inquiry. To address it, comprehensive analysis of economic indicators, market trends, and geopolitical factors influencing currency exchange rates is necessary. Understanding the comparative value of these currencies is essential for investors, businesses, and policymakers alike, as it impacts trade, investment decisions, and international financial stability. Through diligent examination and informed interpretation of data, a clearer understanding of the relative strength between the US dollar and the Canadian dollar can be attained, facilitating informed decisions and strategies in navigating the intricacies of international finance.
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Is US or Canadian dollar worth more?
The value of the US dollar (USD) and the Canadian dollar (CAD) can vary depending on various factors such as economic conditions, interest rates, inflation rates, and geopolitical events. Historically, the US dollar has generally been worth more than the Canadian dollar.
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Why are Canadian dollars worth less than US dollars?
One significant factor is the difference in economic size and strength between the United States and Canada. The US economy is larger and more diversified, with a higher GDP and greater global influence compared to Canada. Additionally, differences in interest rates set by the respective central banks can influence currency values, apart from other factors like market perceptions of political stability, economic policies, and market liquidity.
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What will USD vs CAD be in 2024?
Predicting exact exchange rates for currencies like USD vs CAD in the future is challenging due to the many variables involved. However, on March 1st, 2024, TU analysts noted that the US dollar was traded for the Canadian dollar at around 1.3580, with potential for fluctuations based on factors such as inflation data and oil prices. Analysts suggested that if oil prices continue to decline, the pair may rise further. However, a loss of support at certain levels could lead to a decline in the exchange rate.
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Should I invest in CAD or USD?
The decision to invest in Canadian dollars (CAD) or US dollars (USD) depends on several factors, including investment goals, risk tolerance, and market conditions. Investing in CAD may be appealing for those seeking exposure to the Canadian economy, particularly if they believe in its growth prospects or want to hedge against currency risk if they have expenses or revenues denominated in CAD. On the other hand, investing in USD may offer diversification benefits, given the US dollar's status as the world's primary reserve currency and its role in global trade.
Will the Canadian dollar get stronger against the US dollar?
In considering the trajectory of the USD/CAD exchange rate in 2024, a key area to consider are the decisions made by central banks and the prevailing inflation rates. These elements are crucial influencers on the movement of currency values. Additionally, the outcomes of the US election hold potential significance, alongside other geopolitical factors. The United States' fiscal policy adjustments post-election and global tensions may exert notable impacts on the strength of the US dollar, thereby affecting USD/CAD rates. Furthermore, observing the comparative economic growth between Canada and the US, alongside potential Bank of Canada interventions and fluctuations in commodity prices, will be pivotal in understanding the dynamics of the USD/CAD exchange rate throughout the year. A more critical dive into these factors is taken through below points.
Interest rates influence
Higher interest rates in Canada compared to the US can attract foreign capital, leading to an increase in the value of the Canadian dollar relative to the US dollar. This attractiveness arises from the potential for higher returns on investments. As of March 1, 2024, the situation is the opposite: the US interest rate is 5.5%, while in Canada it is only 5%, which negatively affects the USD/CAD rate. But the situation may change after the upcoming rate cuts.
Economic indicators impact
Economic indicators such as Gross Domestic Product (GDP) growth rates and unemployment rates provide insight into the economic health of a country. Positive economic indicators in Canada, such as strong GDP growth and low unemployment rates, can contribute to a stronger Canadian dollar compared to the US dollar.
Commodity prices
Canada's economy heavily relies on the export of commodities like oil, potash, silver and zinc. Fluctuations in commodity prices can significantly affect the Canadian dollar's value. Higher commodity prices often lead to increased revenue from exports, which can bolster the strength of the Canadian dollar.
Political stability and economic performance
Political stability and economic performance in both Canada and the US can influence investor confidence. Stable political environments and robust economic performance tend to attract investors, which can result in a stronger currency. Conversely, political instability or economic downturns may lead to a weaker currency.
Inflation rates
Lower inflation rates in Canada compared to the US can result in an increase in the purchasing power of the Canadian dollar relative to the US dollar. Countries with lower inflation rates generally experience stronger currency values as their currency's purchasing power increases.
Public debt consideration
Countries with high levels of public debt may be less attractive to foreign investors due to concerns about inflation and default risk. This reduced attractiveness can lead to a decrease in the value of the currency. Conversely, lower levels of public debt can contribute to a stronger currency value.For actual government debt levels, please visit the Government of Canada's website or click here.
Technical Chart of USD/CAD
Technical Chart of USD/CAD
In the chart above, experts observe a significant pattern known as the double bottom, with a clear support or neckline identified at 1.3200. This pattern typically indicates a potential reversal in the price trend, suggesting a consolidation phase followed by an upward movement. Analysts anticipate the price to ascend towards the resistance level situated at 1.3900, reflecting a bullish outlook for the USD/CAD pair.
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What is the Dollar to CAD prediction for 2024 and 2025?
Meera Chandan, Co-Head of Global FX Strategy at J.P. Morgan, highlights the diverse macroeconomic outlook, ranging from the possibility of additional Fed rate hikes to concerns about a looming recession. Despite this uncertainty, the US dollar (USD) is anticipated to maintain its strength, potentially reaching new highs, particularly if there are rate cuts. Chandan suggests that even with rate cuts, the dollar could outperform more than half of the world's currencies by 2024. Overall, the global economic outlook underscores several key points: growth may slow, inflation moderation might be limited due to supply chain disruptions, and there's a growing vulnerability to recession, with probabilities increasing over time. Here is what the major banks predict about the USD/CAD:
Analysts at the Economy Forecast Agency (EFA) predict that the USD/CAD exchange rate will decline to 1.2800 by the conclusion of 2024 and further to 1.2700 by the end of 2025.
Wallet Investor's estimations indicate that the USD/CAD exchange rate is expected to reach approximately 1.3670 by the close of 2024 and is projected to rise to 1.3940 by the end of 2025.
According to J.P. Morgan Research, the exchange rate for the USD/CAD pair is anticipated to be at 1.3300 by December 2024.
Citibank specialists expect that the quotes for USD/CAD will increase to 1.4000 by the conclusion of 2024.
These forecasts are influenced by factors such as interest rates, economic indicators, political developments, inflation, oil prices, and sometimes even the chosen trading time. Currently, expectations of interest rate reductions and high oil prices above $80 support the Canadian dollar, potentially leading to fluctuations in the USD/CAD pair. In conclusion, while expert predictions indicate potential volatility in the USD/CAD exchange rate, ranging between 1.2700 and 1.4000 in 2024-2025, caution is advised regarding its suitability as a long-term investment option.
Conclusion
In conclusion, the analysis of the US dollar's strength relative to the Canadian dollar in 2024 presents a distinctive picture influenced by a multitude of factors. Despite uncertainties surrounding the global economic landscape, expert forecasts suggest a generally positive outlook for the USD/CAD exchange rate, with potential fluctuations within a range of 1.2700 to 1.4000 throughout the year. Meera Chandan's insights from J.P. Morgan highlight the resilience of the US dollar, even amidst discussions of rate cuts, with the possibility of it outperforming a significant portion of global currencies by 2024. Additionally, various projections from sources like the Economy Forecast Agency and Wallet Investor provide further context, indicating potential declines or increases in the exchange rate over the coming years. However, it's crucial to acknowledge the dynamic nature of currency markets, where factors such as interest rates, economic indicators, and geopolitical developments can swiftly alter expectations. While the future trajectory of the USD/CAD exchange rate remains uncertain, careful attention to these factors can help investors and businesses navigate the currency landscape effectively, ensuring informed decision-making in an ever-changing financial environment.
Team that worked on the article
Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.
As an author for Traders Union, he contributes his deep analytical insights on various topics, taking into account various aspects.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.