Central Banks are responsible for setting interest rates not the value of the domestic currency. The Bank of Canada doesn’t try to set the dollar’s exchange rate. "We let markets set its value. Because the Bank of Canada lets the Canadian dollar float, we can focus on setting interest rates to maintain inflation at 2 percent in Canada" https://www.bankofcanada.ca/2020/08/understanding-exchange-rates/ Read the above explainer from the Bank of Canada and then offer your own understanding of why the Canadian dollar moves against other currencies. Use recent movements in the C$ against the US$ to illustrate your comments.
Central Banks are responsible for setting interest rates not the value of the domestic currency. The Bank of Canada doesn’t try to set the dollar’s exchange rate. "We let markets set its value. Because the Bank of Canada lets the Canadian dollar float, we can focus on setting interest rates to maintain inflation at 2 percent in Canada" https://www.bankofcanada.ca/2020/08/understanding-exchange-rates/ Read the above explainer from the Bank of Canada and then offer your own understanding of why the Canadian dollar moves against other currencies. Use recent movements in the C$ against the US$ to illustrate your comments.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Central Banks are responsible for setting interest rates not the value of the domestic currency. The Bank of Canada doesn’t try to set the dollar’s exchange rate. "We let markets set its value. Because the Bank of Canada lets the Canadian dollar float, we can focus on setting interest rates to maintain inflation at 2 percent in Canada"
https://www.bankofcanada.ca/2020/08/understanding-exchange-rates/
Read the above explainer from the Bank of Canada and then offer your own understanding of why the Canadian dollar moves against other currencies. Use recent movements in the C$ against the US$ to illustrate your comments.
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