When will the Canadian dollar start to appreciate again?

Since 2002, we've been seeing a pattern in which periods of CAD appreciation alternate with periods where the trade balance increases:

The cycle goes something like this:

1. When the trade balance is high, the CAD appreciates. The appreciation brings the trade balance down, and the CAD hits a plateau.
2. While the CAD is plateaued, the trade balance increases.
3. Go to 1.

Right now, we're at step 2: the CAD has been trading in a narrow range around parity with the USD since November, and during this time, the price of oil and other commodities that Canada exports have risen sharply - and so has the trade balance.

Comments

[Bailey]

In the Globe today there is a short article on the Canadian dollar being undervalued:

link

[Stephen Gordon]

Thanks for the link. I'm starting to notice a pattern: I post something, and it shows up a week later in the MSM...