Friday, April 16, 2010

Canadian Dollar – U.S. Dollar Parity Theory


My previous post on October 13, 2009 predicted that the Canadian dollar and the U.S. dollar will hit parity again by April, 2010. And my prediction was correct! The loonie was at par with the greenback once again on April 6, 2010, and has since been flirting with parity a few times for the past week.

When it was trading at 97 U.S. cents to one loonie on October 13 last year, analysts were saying that the loonie could hit parity with the greenback anytime soon, perhaps the following month (November, 2009), or that even happen in the week following October 13, 2009.

But I saw it a bit differently. In my previous post, I wrote:

I have a theory: CAD hit parity (at par) with USD in 1974, and 33 years later in 2007, it did it again. Then again in 1976 (two years after 1974) it hit parity (at par with USD), and (here’s my theory) 33 years later in 2009 (which is two years after 2007), it will do it again.

Because of the timing difference, I am giving myself some leeway: I predict that CAD will be at or above par with USD any time now till April of 2010. Only time will tell if my prediction is correct.

And my theory is empirically correct!