Back on October 16, 2008, I posted my article "Canadian Dollar vs US Dollar and The Price of Oil" (see below) that was well received on ActiveRain. I found a chart recently that set out the estimated Oil Reserves by Country, so I thought that I would re-post my article with a link to this chart. Click Here to see the Chart.
Canadian Dollar vs US Dollar and The Price of OilOriginally posted by me on October 16, 2008.
Many people were wondering last week why the Canadian Dollar started to lose value against the US Dollar, when it appears that the USA was in greater crisis mode in comparison to Canada.
Well here is why....
Canada is one of the world's largest producers of oil and holds oil reserves second only to Saudi Arabia, which makes Canada very reliant on its most prized commodity. It is also the largest supplier to the world's biggest oil consumer - the United States. Therfore, rising oil prices tend to be good for Canada/bad for the U.S., while falling oil prices tend to be bad for Canada/good for the U.S.
As you can see from the chart above, price movements USD/CAD and Oil are inversely correlated from each other - meaning as oil trends higher, USD/CAD tends to trend lower and vice versa.
Since January 1988, USD/CAD and Oil have had about a 68% inverse correlation to each other. This is a pretty strong correlation.
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