Interchange Financial- Your Final Destination For The Best & Lowest USD to CAD Exchange Rate

 Which Factors Influence The USD to CAD Exchange Rate & Why Does It Matter The Most?

Everyone wants the best value of their hard-earned money while exchanging it for any other currency, say USD to CAD. Do you know how this can be possible? This can be possible only if you get the best and lowest currency exchange rate that translates to more money in your account. Now, banks usually provide an outdated and high USD to CAD exchange rate which means that more proportion of your money is flowing to the bank instead of to you or the recipient. 

After understanding the above, you might wonder what all factors influence an exchange rate and why low exchange rates matter the most to Canadians. If yes, continue reading to know in detail about this and much more. 

What Factors Affect The Exchange Rate?

The USD to CAD exchange rate is a major driving factor in the Canadian economy whose value alters every second. Due to this, it's closely monitored by the policymakers and businesses after being analyzed by hundreds of analysts around the world as it's significant to the global economy as well. 

Thus, it becomes a lot more critical to understand what factors influence the exchange rate if you wish to exchange your currency in the future. 

First, the level of current and future expected interest rates in both countries top the list as investors look for a currency with the highest interest return to hold assets. In brief, the currency with a better interest rate will be the first pick of investors. However, as this interest rate isn't fixed and alters every second, the investors consider both the current and future (expected) interest rates as illustrated in the yield curves of Canada & the US. Remember that the investors also take into account the expected inflation while choosing the currency, this, however, becomes secondary to the higher currency. 

Then comes the price of commodities, especially oil, that influences the value of USD to CAD conversion rate. Being a leading exporter of oil to the global market, especially the US, any uplift in the oil's value directly affects the Canadian dollar value. In a nutshell, the higher the value of the oil, the higher the value of the Canadian dollar and vice-versa. It's worth noting that the fluctuations in the prices of other commodities too have a say in this regard, however, not as much as of the oil!

Another factor to be mindful of is the perceptions of overall risk. Out of all the global currencies, the US dollar is regarded as the "risk-haven" i.e. whenever the global economy erodes, the investors ought to prefer the US dollar. Thus, the more the risk awareness, the higher the value of the US dollar and vice-versa. On a contrary, the Canadian dollar has got the label of "risk currency" i.e. it performs better when the global economy improves or risk recedes. 

The value of the Canadian dollar likewise swings upwards or downwards as the stock market. 

Lastly, geopolitical developments around both countries are another driving force of their currency. For instance, tensions with China tend to stretch the risk and drive up the value of the US dollar. On the other hand, tensions in the Middle East tend to drive up the oil prices and so that of the Canadian dollars. 

Why Does All This Matter To The Canadians?

It won't be wrong to state that the USD to CAD exchange rate has a direct influence on the economic life of Canadians. Let's consider the following example to understand the implications of the exchange rate for a Canadian company. 

If you're selling your goods to the US, their price will rise or drop exponentially in US dollars as the value of the Canadian dollars goes up or down respectively. This also holds validity if you're a consumer ordering something priced in US dollars as the value of your order will soar up if the US dollar becomes expensive and vice-versa. 

Further note that the importance of the USD to CAD exchange rate is also true no matter if you're buying or selling something in Hong Kong or Germany. 

The Final Takeaway!

The USD to CAD conversion rate is of great importance to the Canadian economy. Thus, it's imperative to closely monitor its value to drive the Canadian economy. For this, the policymakers and analysts keep an eagle's eye on the various factors as discussed above. Send Money to Australia