The Canadian Exchange Rate

A: Thanks for the timely question! Exchange rates have been a hot topic in the first half of 2003. If you're unfamiliar with how exchange rates work, you should take a look at my A Beginner's Guide to Exchange Rates.

I'll answer the last question first, but at the end of the article examine the performance of the Canadian Dollar during the first 5 months of 2003. It's quite often difficult to find reliable and free exchange rate data on the Internet. The only comprehensive service that I know of is the PACIFIC Exchange Rate Service at the University of British Columbia which is an excellent resource on exchange rates. Provided by Prof. Werner Antweiler, the mission of the Exchange Rate Service is to:

"[Provide] access to current and historic daily exchange rates through an on-line database retrieval and plotting system. Also provided is a list of all the currencies of the world with information on each country's exchange rate regime and ISO-4217 currency code. Analyses and trend projections of the Canadian Dollar, the U.S. Dollar, and the Euro are available as well. This site is dedicated to the support of academic research and teaching in the area of exchange rate economics."

The site allows you to get and use all kinds of exchange rate data. The Retrieve Data section allows you to get daily, weekly, or monthly data comparing any major currency to one or more other world currencies. You can pick what time period you want to look at, and you can save the data as a Hypertext Table, Plain Text Table, LaTeX(2e) Table, Comma-separated Spreadsheet (CSV), or Tab-Separated Spreadsheet. If you want to use the data in Microsoft Excel I'd suggest saving the data as a "Comma-separated Spreadsheet" as CSV files are Excel friendly.

If you just want a quick and easy way to look at the data instead choose "Hypertext Table" and the table will appear in your browser. I tried this out a couple of times: first I compared the U.S. Dollar (USD) to the South Korean Won (KWR). The second time I compared the Canadian Dollar (CAD) to both the U.S. Dollar and the South Korean Won. The data I collected from the site is shown on the bottom of the page. The data is quite interesting: it shows that the Canadian Dollar has appreciated considerably against the U.S. Dollar and the South Korean Won between January and May of 2003, while the rate between the U.S. Dollar and the Won has been fairly steady. Choosing the "Hypertext Table" option of the Retrieve Data section allows you to perform all kinds of crude analyses.

Fortunately if you want a more sophisticated analysis of the performance of the Canadian Dollar, the Exchange Rate Service provides it in their section. The analysis, which is updated daily, compares the Canadian Dollar to six world currencies: The British Pound (GBP), Euro (EUR), Japanese Yen (JPY), Mexican Peso (MXP), Swiss Franc (CHF) and the U.S. Dollar (USD). There are four broad measures we can use to look at the exchange rate. We'll examine them in the next section and analyze the recent performance of the Canadian Dollar using those measures.

Be sure to continue to page 2

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