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Greek Economic Crisis Affecting Canadian Dollar

The loonie fell to 97.12 cents against the US dollar, though it is gaining strength against the EURO. Investors are selling off the EURO in light of the Greek economic crisis. Both the US and Canadian dollar are rising against the EURO.

It's a little difficult to understand why investors would flee the Canadian dollar to US currency in times of economic crisis. The Canadian economy remains poised for growth and national debt to GDP ratio is half that of the US.

The reason for the sell-off of the Canadian dollar lies in global economics. Investors feel that if Europe's economic recovery is hurt by Greece's problems then there will be less demand for raw materials. Canada supplies many raw materials such as lumber, oil, and metals to the world. Softening in demand for raw materials would lead to softening in demand for the Canadian dollar and hurt the Canadian economy.

Actually, a lower Canadian dollar helps the Canadian dollar by making their exports cheaper to other countries. It also means imports into Canada cost more which means locals would rather buy more Canadian products.

Canada's economy outperformed other G-7 countries' economies during the recent recession and is set to grow faster during the recovery. If the global economy suffers then it's likely the Canadian government will hold or lower interest rates. Lower interest rates help to spur economic growth by making borrowing easier and hurting those who save.

This Friday the German government will vote on approving a US$145-billion bailout package for Greece. Greek citizens do not like the terms and conditions of the bailout and are protesting and rioting in the streets of Athens.

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Greek Economic Crisis Affecting Canadian Dollar

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