This week is "currency week" in Market Notes. Each day, we'll take a different stop on a global currency tour to gauge the state of the world. Our first stop is Canada.
A nation's currency is like a rough "stock price" of that nation. Generally speaking, if a country manages its finances well and engages in productive behavior, its currency appreciates over the long term. If a country racks up crazy debts and runs its finances like a drug addict, its currency depreciates over the long term.
As you can see from today's chart, Canada is doing a good job of managing its affairs. The country's banks didn't take on the ridiculous risks, like the ones in Iceland, the U.S, and the U.K. did. Canada's economy is also heavily tilted toward natural resource production… raw materials including oil, natural gas, timber, copper, uranium, and gold. These materials are up big in the past year.
All of this has come together to produce the steady uptrend you see below. The "loonie" has appreciated 28% since March 2009… a huge gain in value for a major currency. You want money backed by "hard assets" like gold and oil? You want the loonie!
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