One of the most common questions I get is “what will happen to the Canadian dollar?” Canadians are particularly concerned with the exchange rate between Canadian and U.S. dollars. Many planned sunny vacations this past winter were canceled or shortened due to our low dollar. So, what will happen with future exchange rates? Currency exchange rates are determined in the largest market in the world, called the foreign exchange market. Here large international banks exchange trillions of dollars worth of various currencies every day . The tiniest mispricings or inefficiencies could be exploited by savvy participants for billions of dollars per year. Suppose a talking head on television predicts a rise in the Canadian dollar. Let’s dig into what this prediction means. To begin with, if everyone else agreed with the talking head, then they would seek to profit by buying Canadian dollars immediately. This would cause the dollar to rise immediately. So, a huge number of banks and...

1. Stock markets in the US and Canada were up this year. The gains were small enough that some would call this a “sideways” market where only stock-pickers can make money. Of course, stock pickers can only make more money by taking it from each other. For every extra dollar that one stock picker made above this year’s average market return, some other stock picker made a dollar less than the average. 2. Apple stock more than doubled. Technical analysts who study patterns in stock price charts could no doubt show you how this could have been predicted by their methods. Personally, I think it has more to do with those little iPod things that everyone is buying. 3. The Canadian dollar overtook the US dollar. Only a few years ago the Canadian dollar was the butt of jokes. (What’s another name for the Canadian twonie? A US dollar.) I think Canadians told these jokes more often than Americans did. The higher Canadian dollar should have caused the price of goods imported into Canada to drop, ...