"Because Canada is a large producer and net exporter of resource-based goods, the Canadian dollar is often referred to as a commodity-based currency. In other words, the value of the Canadian dollar is correlated to the strength of world commodity prices. When world commodity prices are high, then resource-based industries in Canada are more profitable, making the Canadian economy stronger and thus attracting investment and placing upward pressure on the Canadian dollar. When commodity prices fall, they undercut revenues for resource-based firms, eroding profits, dampening the domestic economy and pushing down the Canadian dollar.
Commodity prices are largely determined by the strength of the global economy. A strong global economy tends to raise demand for -- and therefore prices of -- basic commodities, conversely, in times of economic weakness, demand for (and prices of) those commodities falter. Accordingly, in times of world economic strength, the Canadian dollar tends to rise; in times of weakness, the dollar tends to fall."
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