Canadian Dollar Vs US Dollar - Research Paper Example

Task: Canadian dollar Vs US dollar The strength of the Canadian dollar is higher upon comparison to countries’ like the US. The highest currency rate of the Canadian dollar against that of the US was 1.04 percent on September 2012. The Canadian currency rate is becoming higher than that of the US not because the US dollar is depreciating, but because the Canadian Dollar is appreciating. Recent trends in the use of money The recent trends highlighting the utilization of money in several states entail money laundering. This focuses on the conversion of properties or money that one acquires unlawfully into a country’s money system. Several countries use their money to fund criminal activities such as terrorism to reduce the strengths of other countries’ currency especially through the destruction of markets. The aim of all unlawful acts is to generate financial gains. Consequently, the availability of the working capital is vital for the sustainability of the criminal and terrorist networks. For instance, the criminal tendencies such as the allocation of narcotics and arms require an international network that consists of marketers, manufactures, transportation, and personnel. The criminals receive pays in cash lest their activities are recognized through transaction records. Criminal activities focus on the utilization of money using various approaches. For instance, such activities use cash through the primary phases of money laundering such as placement of the criminal processes within fiscal systems, layering money to hide original sources of the criminal activities, and incorporation into lawful economic markets like banks (Weld 1). The major criminal activities such as drug trafficking generate significant proportion of resources that boosts the country’s economy after integration into the legal markets. For instance, illegal tobacco business generates revenues of about 40.5 US dollars in the US. Some criminals especially terrorists do not integrate their money through the legal market systems because they can easily be traced. Consequently, they use the ethnic-based cash service enterprises such as those who operate travel agencies to launder funds. Additionally, such illegal businesses can reduce a country’s revenues. For instance, other recent criminal money use entails the use of fake money to get the legal currencies. This contributes to the reduction of the strength of the countries’ currencies. Other money laundering acts entail infusing unlawful money into the football sectors. These sectors are very attractive to criminals especially persons who intend to use their unlawful money (Weld 1). The history of the Canadian dollar relative to its US counterpart In 1971, the total exchange rate of the Canadian dollar against the US was approximately 1.22. The highest Canadian rate during this year was 1.60 while the lowest was 0.96. Between the 1971 and 2011, the lowest exchange rate of the Canadian Dollar against the US was in 1974. During this year, the average Canadian rate against the US was 0.98. Between 1971 and 2011, the highest exchange rate for Canada dollar was 1.57. This was in the year 2002 (Hummel 1). The current 12 month forecast of the Canadian and the US dollar indicates that the exchange rate for the Canadian dollar will be approximately 1.00 Canadian dollars to the US Dollar in future. This is because the coinage trend shows that the exchange rate can easily fall by 0.04 percent implying that the Canadian currency rate would be 0.94 by November 2013 (Hummel 1). The exchange rate for the Canadian dollar in the year 2012 was approximately 0.99 in October. That is 0.7 point higher compared to October 2011. By September 2012, the rate escalated by 1.04. According to some economists, this is a minor movement, and if it continues, the immediate trend would be comparatively flat. The one year shows that the country’s exchange rate was 1.00 averagely. Moreover, the standard conversion rate of the last 10 years was 1.14. Reports also show a higher Canadian Dollar than the US Dollar exchange rates between January and September. This implies that the future rate trend of the Canadian Dollar compared to that of the US is high. This reduces the strength of the US dollar upon comparison to Canada (Paul 1). Within the past 12 months, the highest currency rate that Canada ever reached was 1.03 in October 2012. The lowest it ever reached was 0.98 in September 2012. However, during September when the Canadian exchange rate was the lowest, it was higher than that of the US by 1.04 percent. The Canadian dollar became five-month higher than its US counterpart did. The currency rose on the fourth day of the month. This corresponded to a lengthy string of improvement in more than a month compared to the US that is the biggest trade associates. It rose by about 0.5 percent to 98.55 cents compared to the US dollars in Toronto. In September 19, last year, the Canadian currency became the strongest. During this time, one Canadian dollar could purchase 1.04 US dollars. The Canadian currency rose by 3.6 percent this year compared to the US. It is expected that the Canadian dollar will be lower than the US. This is evident in recent report indicating that the current greenback was 31.3 compared to the previous 35.6 (Paul 1). Why is the Canadian dollar worth $1.04 US (first week of September) and rising/falling? The Canadian dollar worth 1.04 US dollars is rising because of the high demand for the Canadian raw materials. The increase in demand results from the global economic expansion. Canada deals with goods that are on high demand globally. For instance, it generates the largest percentage of produces from the raw material such as crude oil, copper, gold, and agricultural products. However, the US dollar is weaker because of the low demand for the country’s goods that are becoming expensive. This contributes to the reduction of US exports to other countries. An analysis of the strength of the Canadian Dollar compared to the US Dollars for the past ten years shows that the US dollar is weaker than Canada by approximately 38 percent. In the first week of September, the value of the Canadian became higher than that of the US because the US factory gauge dropped against the country’s expectations (Sherman 1). Additionally, the Canadian dollar rose higher than the US because of the fall in the US unemployment application benefits. The applications dropped from 355,000 to 351, 000 since March 2008. However, the rate of employment in Canada is higher. Within the last six month, the country created about 28,000 jobs. This helped in supporting the real estate business, consumer buying abilities, and retail sales. This also contributed to the reduction of unemployment rate by approximately 7.2 percent in the country. The market researchers also discovered that the Canadian dollar rose because of the higher expansion of the Gross Domestic Products (GDP) compared to the US. The GDP rose from 1.8 to 3.5 percent between October and December, which was the third quarter. Furthermore, the country has lower debts compared to the US. These debts contribute to the attractiveness of the country’s dollar (Health 1). The fall of the Canadian currency results from the reduced oil prices due to the market shocks. These are attributable to attacks such as Iran. According to the country’s expectations, the increase in the oil prices would lead to positive outcomes as far as the country’s currency is concerned. However, this resulted into the dominance of the risk themes (Dmitrieva 10). Conclusively, the Canadian currency is increasing gaining strength compared to the US based on various reasons. One of the reasons entail the higher rate of employment in Canada compared to the US. The increase in employment increases the ability of the country’s citizens to buy products. This increases the demand for the country’s commodity. However, the demand for commodities in the US is lower because of the high cost of goods and lower employment rate compared to Canada. Works Cited Dmitrieva, Katie. Canadian dollar weakens as stocks decline on aversion to risk. 2012. Web. 26 November 2012. Heath, Allister. Why the Loonie is a Sane Currency. Sunday Business. Web. 26 Nov. 2012. Hummel, Calla. Canadian currency vs. American Currency. 1999. Web. 26 November 2012. Paul, E. Desmier. "Estimating Foreign Currency Exposure in the Canadian Department of National Defence." The Journal of Risk 10.4 (2008): 31-68. ABI/INFORM Complete. Web. 26 Nov. 2012. Sherman, Austen. Canadian dollar reaches strongest level since September on global outlook. 2012. Web. 26 November 2012. Weld, Jean. Current international money laundering trends and anti-money laundering co- operation measures. 2012. Web. 26th November 2012. Read More