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Graeme MacKay is the Editorial Cartoonist for
Hamilton  -  Ontario  -  Canada
January 23, 2002

The Canadian dollar had gone into a tailspin over the
last decade up to 2002. While reaching a peak of
US$0.8934 in 1991, the Canadian dollar subsequently
fell to US$0.73 in 1996, US$0.6311 in 1998, and
US$0.623 in November 2001.

A strong American dollar was only part of the
explanation for the Canadian loonie's decline. While
most currencies had fallen relative to the American
dollar, the Canadian dollar declined far more than most.
This larger drop was due to a fall in demand for the
Canadian dollar.

Canada runs a floating exchange rate system. Private
investors determine the value of the Canadian dollar
through a system of supply and demand. Simply put, if
there is an increase in Canadian investment, then the
demand for and the value of the Canadian dollar goes
up. If there is a decrease in Canadian investment, then
the demand for and the value of the Canadian dollar
goes down. Other factors were declining commodity
prices, high government debt, Quebec separatism, and
low interest rates.  
SOURCE