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1. What most surprised me was daily activities, such as buying imported products affect currency rates. Before starting this research, I did not have great ideas about foreign currency rates, and I was thinking maybe some super smart or rich people trade currencies and control the market. Now I know there are so many factors that can change currency rates.

2. Since the Canadian dollar rate against the U.S. dollar is one of the biggest topics for the Canadian economy, you should keep an eye on the prices of American products. As the author of the article “What’s the deal with the Canada-U.S. exchange rate?” mentions the price of a bunch of celery bumped up from $3.99 to $6.99 in January 2016. Groceries from the USA such as fresh vegetable, fresh fruit and non-alcohol beverages can be affected a lot by the currency rates.

3. I found the connection between the value of oil and the Canadian dollar most interesting. Most of the time, when the Canadian dollar appreciates, the value of oil also goes up. However, there has been a different pattern since 2013, even the price of oil increased, the loonie has been remained low because of other factors. I think following this pattern helps me keep interested in the global news, since current events such as NAFTA, the interest of Bank of Canada, the trade war between the U.S. and the world affect the pattern significantly.

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Canadian dollar drops to lowest level since 2004 - Video #2

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Canadian dollar drops to lowest level since 2004 - Video #2

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I have looked up so many videos to find one that explains what is going on with the Canadian dollar for the last few years. However, no one really explains clearly enough for economics beginners. Then, I figured out that it must be difficult to explain the rate movement, since there are a number of factors that can affect the rate, for instance NAFTA, each of Trump’s comments on Twitter, the cost of oil, American and Canadian interest rates, the economy, etc.

What I can say now is that the low currency rate does not always mean a bad situation. It is good for Canadian exporters such as agricultural products.

http://www.cbc.ca/player/play/2672338578/ by CBC News (2015)

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Canadian dollar drops to lowest level since 2004

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Drop comes as federal budget watchdog says Ottawa won't be able to deliver its long-promised surplus this year

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I did not think everybody is a part of what causes currencies to swing by daily activities such as grocery shopping!

https://youtu.be/IYdt-16FoC4 by SmithBusinessSchool (2015)

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University of Maryland Smith School of Business

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This graph illustrates that the Forex market had been growing in the period between 2007 and 2010. In addition, more than one-third of the trading was performed in the U.K. in 2010. The biggest currency pair was USD and Euro, which had 28% of share in the market.

http://www.forexreviewarchive.com/what-is-forex-market/ by FOREX REVIE ARCHIVE (2018)

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Advertisements always sound very attractive. By following this video which introduces the Forex market, making a good economy forecast is one way to earn profit by  Forex trading. I assume that economists should be able to make good profit by the market, as they have excellent knowledge and they follow up on the movement of economies. I have not heard of any economists that made a lot of money, though.

https://youtu.be/SDMPrsx0XLs by FBS - Global Leader in Forex Market (2018)

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Advantages and Disadvantages of Fixed and Floating exchange rate - Image #1

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Advantages and Disadvantages of Fixed and Floating exchange rate - Image #1

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Most of the fixed exchange rates are pegged to a popular currency such as the U.S. dollar. As a result, one of the biggest advantages for small economy countries is when the U.S. economy grows, the economies of the countries which are pegged to the U.S. dollar grows as well. One of the disadvantages is that it costs a lot to manage to fix the currency rates.

https://www.slideshare.net/ecbarr/singapore-foreign-exchange-policy by Barr, E. & Purvis, D

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What’s the deal with the Canada-U.S. exchange rate? - Image #2

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What’s the deal with the Canada-U.S. exchange rate? - Image #2

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The rate has been declining since the summer in 2014, when the oil price started going down.

Today, Oct 29 in 2018, 1 Canadian dollar is valued at 76 U.S. cent.

https://www.moneysense.ca/spend/shopping/whats-the-deal-with-the-canada-u-s-exchange-rate/ by Rothery, N. (2016)

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Imports, Exports, and Exchange Rates - Video #1 (Especially after 5:25)

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Imports, Exports, and Exchange Rates - Video #1 (Especially after 5:25)

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While many countries have flexible exchange rates, others have fixed exchange rates. Flexible exchange rates are not intervened or regulated actively by the governments or the central banks.

The Chinese government is now shifting from a fixed to flexible exchange rate. However, the government still intervenes in the exchange rate by buying the U.S. dollars to keep the Chinese Yuan depreciated artificially. So then, they can export their products with cheaper prices to the U.S.

https://youtu.be/geoe-6NBy10 by CrashCourse (2015)

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Imports, Exports, and Exchange Rates: Crash Course Economics #15

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How Does Foreign Exchange Trading Work? - Website #3 

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How Does Foreign Exchange Trading Work? - Website #3 

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Forex trading still sounds sketchy for me. Especially "leverage" sounds like just gambling. It is true that majority of new traders quit Forex trading after losing money and they may feel scammed.

As many articles say, if you try to make living by Forex trading, you have to make a great effort to learn the system. It is the same as working.

Now I am curious to try a forex trading demo to see how it works.

https://www.thebalance.com/how-does-foreign-exchange-trading-work-1345162
by Russell, J. (2017)

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Foreign exchange trading was once just something that people had to do when traveling to other countries. They would exchange some of their home country's currency for another and endure the current currency exchange rate.

These days, when you hear someone refer to foreign exchange trading, they are usually referring to a type of investment trading that has now become common. Traders can now speculate on the fluctuating values of currencies between two countries. It's done for sport and profit.

It seems like something that most people would find easy, except, in this particular industry, there is a high rate of failure among new traders. Even traders that are aware of that tend to start out with the attitude of "It happened to them, but it won't happen to me." In the end, 96 percent of these traders walk away empty handed, not quite sure what happened to them, or maybe even feeling a bit scammed.

Forex trading is not a scam; it's just an industry that is primarily set up for insiders that understand it. The goal for new traders should be to survive long enough to understand the inner working of foreign exchange trading and become one of those insiders.

The number one thing that hangs most traders out to dry is the ability to use forex trading leverage. Using Leverage allows traders to trade on the market with more money than what they have in their account. For example, if you were trading 2:1, you could use a $1,000 deposit, to control $2,000 of currency on the market. Many forex brokers offer as much as 50:1 leverage. New traders tend to jump in and start trading with that 50:1 leverage immediately without being prepared for the consequences.

Trading with leverage sounds like a really good time, and it's true that it can increase how easily you can make money, but the thing that is less talked about is it also increases your risk for losses. If a trader with $1,000 in their account is trading with 50:1 and trading $50,000 on the market, each pip is worth around $5. If the average daily move is 70 to 100 pips, in a day your average loss could be around $350. If you made a really bad trade, you could lose your entire account in 3 days, and of course, that is assuming that conditions are normal.

Most new traders being optimistic might say "but I could also double my account in just a matter of days." While that is indeed true, watching your account fluctuate that seriously is very difficult to do. Many people start out assuming that they can handle it, but when it comes down to it, they don't, and forex trading mistakes are made.

Assuming that you can manage not to fall into the leverage trap, you'll need to have a handle on your emotions. The biggest thing that you'll tackle is your emotion when trading forex. The availability of leverage will tempt you to use it, and if it works against you, your emotions will have your vision upside down, and you will probably lose money. The best way to avoid all of this is to have a trading plan that you can stick to. Not only should you have a trading plan, but you should keep a forex trading journal to keep track of your progress.

You might feel when looking around online, that other people can trade forex and you can't. It's not true; it's just your self-perception that makes it seem that way. A lot of people that are trading foreign exchange are struggling, but their pride keeps them from admitting their problems, and you'll find them posting in online forums or on Facebook about how wonderful they are doing when they are struggling just like you.

Winning at trading forex online is an achievable goal if you get educated and keep your head together while you're learning. Practice on a forex trading demo first, and start small when you start using real money. Always allow yourself to be wrong and learn how to move on from it when it happens. People fail at forex trading every day for lack of ability, to be honest with themselves. If you learn to do that, you've solved half of the equation for success in forex trading.

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Forex Trading Isn't a Scam (Alhough It Is Complicated)

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Foreign exchange trading was once just something that people had to do when traveling to other countries. They would exchange some of their home country's currency for another and endure the current currency exchange rate. These days, when you hear someone refer to foreign exchange trading, they are usually referring to a type of investment trading that has now become common.

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Oil prices are high. So why is the Canadian dollar still so low? - Website #2

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Oil prices are high. So why is the Canadian dollar still so low? - Website #2

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After a crash in the value of Canadian oil in 2014, the value has gone back up. However, the Canadian dollar against the U.S. dollar is still low. This is not happening only in Canada, but also other big oil exporters such as Russia and Norway. Some of the reasons the oil price increased are:

A shortage of crude oil supply in Canada

The U.S. president threatened countries that import oil from Iran

In addition, one of the reasons the Canadian dollar is low is that Trump’s stance on the trade war helps to increase the U.S. currency, while harms other currencies.

https://globalnews.ca/news/4302375/canadian-dollar-oil-prices-trump-trade-war/ by Alini, E. (2018)

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One doesn't need to be a currency analyst to know that, usually, when oil prices rise, so does the Canadian dollar.

Right now, though, Canadian consumers seem to be getting the short end of the stick on both ends. On the one hand, the price of oil is at a three-and-a-half year high - good news for the economy, but generally a bad omen for motorists - while on the other hand, the loonie keeps hovering around 0.75 U.S. cents, so lower than it was 12 months ago.

So what's happening?

Other 'oil currencies' are also slumping

Canada is not alone, said Greg Anderson, global head of foreign exchange strategy at BMO. The currencies of other big oil exporters, like Russia and Norway, aren't getting a big boost from the recent oil price gains, either.

In part, this is because markets seem to think the current trajectory of oil prices increase the chances of more interest rate hikes by the U.S. Federal Reserve, Anderson told Global News via telephone.
READ MORE: How China is preparing for a potential trade war with the U.S.
High oil prices tend to push up inflation, while higher interest rates do the opposite. Central banks generally tweak interest rates to keep inflation within a desirable, moderate rate that helps foster stable economic growth.

In the U.S., where a booming economy was already pushing up inflation, climbing oil prices make future rate hikes even more likely, the markets seem to be forecasting.

And higher interest rates usually boost a country's currency value.

Of course, high oil prices tend to push up inflation in every country. But economies, like Canada's and the European Union's, are growing more slowly, so there's less of a case for higher interest rates.

"Many other central banks have said [the fact that oil prices are higher] doesn't mean we're going to hike rates," Anderson said.

The Bank of Canada, for its part, is widely expected to raise rates one more time this year. But Canada's economy has been slowing down, rather than accelerating, so there's little pressure on the central bank to keep pushing up rates.
READ MORE: Trump's tariffs and new mortgage rules to affect Bank of Canada interest rate, Stephen Poloz says
Canada is part of the reason why oil prices are spiking

To make things worse, even Canadian producers aren't benefiting from the current oil price spike as much as they could, as Alberta's giant Syncrude Canada's oilsands facility struggles with production problems.

In fact, analysts have pointed to Canada's crude supply woes as part of the reason for the price increase.
READ MORE: Alberta premier says Trump attacks show need for pipeline
This adds to recent concerns about a major decrease in the world's oil supply after President Donald Trump threatened this week to impose sanctions on countries that import oil from Iran, one of the world's major crude exporters.
WATCH: Trump suggests cancelled Iran deal has progressed Middle East Peace Plan
Still, the production shutdown at Syncrude is expected to free up pipeline space out of Western Canada and strengthen prices for Canadian heavy oil.

If the price of Western Canadian Select, a blend of oilsands bitumen and lighter oil, stays at or above US$50 a barrel for the next six months or so, "there's cause for the Canadian dollar to do better," Anderson said.
READ MORE: Syncrude outage expected to ease pipeline congestion, boost heavy oil prices
And then there's the trade war

Worries about President Trump's increasingly harsh stance on trade are also helping to prop up the U.S. dollar and harm other currencies, including Canada's.

"Steel and aluminum tariffs proved to investors that the Trump administration wasn't going to let Canada off the hook for perceived unfair trade practices," reads a recent CIBC report. "The recent increase in verbal jabs across the 49th parallel show that Canada is now a focus of the administration's ire regarding trade rather than just a bystander."

Because the U.S. has a large trade deficit with the rest of the world, it would likely suffer less than more export-oriented economies like Canada if global trade flows dropped in a trade war, Anderson said.
WATCH: Trump says Canada won't 'take advantage' of U.S. anymore
CIBC expects the Canadian dollar to weaken further to $0.74 U.S. cents by the end of the year. But things could get worse if Washington were to implement U.S. auto tariffs against Canada.

The flip side, Anderson said, is that the U.S. president "changes lanes very quickly."

If he switched his mind about auto tariffs next week, the Canadian dollar would see an immediate benefit.

"You should see that as a two-way risk."
With a file from the Canadian Press

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Oil prices are high. So why is the Canadian dollar still so low?

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One doesn't need to be a currency analyst to know that, usually, when oil prices rise, so does the Canadian dollar. Right now, though, Canadian consumers seem to be getting the short end of the stick on both ends.

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Exchange Rates and What Affects Them - Website #1

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Exchange Rates and What Affects Them - Website #1

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Basically, currency rates work in the same way as the supply and demand curve as we have learned in the class. When there is a lot of demand for a currency, the currency rate goes up. When there is too much supply of the currency, the rate goes down. However, there are many factors that affect rates. For examples:

The interest rate paid by the country’s central bank

How much money the central bank prints

The country’s economy growth

https://www.thebalance.com/how-do-exchange-rates-work-3306084 By Amadeo, K. (2018)

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Exchange rates tell you how much your currency is worth in a foreign currency. Think of it as the price being charged to purchase that currency. Foreign exchange traders decide the exchange rate for most currencies. They trade the currencies 24 hours a day, seven days a week. This market trades $5.3 trillion a day.

You must plan for exchange rate values when you travel overseas. When the U.S. dollar is strong, you can buy more foreign currency and enjoy a more affordable trip. If the U.S. dollar is weak, your trip will cost more because you can't buy as much foreign currency. Since the exchange rate varies, you might find the cost of your trip has changed since you started planning it. It's one of the ways ​ exchange rates affect your personal finances.

You can Google the U.S. dollar to foreign currency exchange rate to get today's rate. It also shows a chart revealing whether the dollar is strengthening or weakening. If it's strengthening, you can wait until right before your trip to buy your currency. Check to see if your credit card company charges conversion fees. If not, then using your credit card overseas will get you the cheapest exchange rate. If the dollar is weakening, you might want to buy the foreign currency now rather than waiting until you travel.

Banks charge a higher exchange rate, but it might be cheaper than what you'll pay in the future. Here are the recent changes in the euro to dollar exchange rate.

Other currencies, like the Saudi Arabian riyal, rarely change. That's because those countries use fixed exchange rates that only change when the government says so. These rates are usually pegged to the U.S. dollar. Their central banks have enough money in their foreign currency reserves to control how much their currency is worth. To keep the exchange rate fixed, the central bank holds U.S. dollars. If the value of the local currency falls, the bank sells its dollars for local currency. That reduces the supply in the marketplace, boosting its currency's value.

It also increases the supply of dollars, sending its value down. If demand for its currency rises, it does the opposite.

The Chinese yuan used to be a fixed currency. Now the government is slowly transitioning to a flexible exchange rate. That means it changes less frequently than a flexible exchange rate, but more frequently than a fixed exchange rate. Here is the most recent yuan to dollar conversion rate.

The demand for a country's currency depends on what is happening in that country. First, the interest rate paid by a country's central bank is a big factor. The higher interest rate makes that currency more valuable. Investors will exchange their currency for the higher-paying one. They then save it in that country's bank to receive the higher interest rate.

Second, is the money supply that's created by the country's central bank. If the government prints too much currency, then there's too much of it chasing too few goods. Currency holders will bid up the prices of goods and services. That creates inflation. If way too much money is printed, it causes hyperinflation. That usually only happens when a country must pay off war debts. It's the most extreme type of inflation.

Some cash holders will invest overseas, where there isn't inflation. But they'll find that there isn't as much demand for their currency since there's so much of it. That's why inflation will push the value of a currency down.

Third, a country's economic growth and financial stability impact its exchange rates. If the country has a strong, growing economy, then investors will buy its goods and services. They'll need more of its currency to do so. If the financial stability looks bad, they will be less willing to invest in that country. They want to be sure they will get paid back if they hold government bonds in that currency.

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Exchange rates tell you how much your currency is worth in a foreign currency. Think of it as the price being charged to purchase that currency. Foreign exchange traders decide the exchange rate for most currencies. They trade the currencies 24 hours a day, seven days a week.

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I love traveling over the world and always wonder what exchange rates are. Why are some expensive and some are not? So, I picked the topic and made this board. I hope this will help you (and me) understand basic ideas of exchange rates.

This board will answer mainly these 3 questions:

1. How do foreign exchange rates work?

2. How has the Canadian dollar rate been for the last few years?

3. Is Forex a good way to invest?

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by Misayo Sato