Canadian Dollar Overvalued By 10 Per Cent, World Economics Says

Canadian Dollar Overvalued By 10 Per Cent, World Economics Says. (FULL ARTICLE)

The Canadian dollar is suffering from overvaluation, according to a new measure of global currencies’ value.

The loonie is 10.1 per cent stronger than it should be when comparing the cost of a basket of goods here and in the U.S., according to analysts at World Economics who are testing out a new measure to compare prices worldwide.

What this means is that the loonie would have to be 10 per cent lower for goods to cost the same in Canada as they do in the U.S.

The estimate agrees almost perfectly with an analysis from BMO Capital Markets, released last week, that shows prices in Canada are about 10 per cent higher than they are in the U.S. However, that actually marked a narrowing of the gap, from around 14 per cent in May of 2012.

But Canada’s high-flying dollar is still not as overvalued as currencies in some other countries. The euro in France is overvalued by 28 per cent, when looking at the cost of goods in that country. At the other end of the spectrum is India, whose rupee is undervalued by about 45 per cent, the survey found….

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