Canadian Currency May Be Overvalued

The Canadian dollar is overvalued by several cents when taking into account the country’s foreign debt, a new study said.

The Canadian dollar, which recently traded at 73.66 U.S. cents, should be trading in a range between 69 U.S. cents and 72 U.S. cents, said Mark Chandler and David Laidler in a report published by C.D. Howe.

That’s because Canada’s foreign debt, comprising some 40 percent of its total debt of about US$405 billion, is too large a burden to sustain in the long run given the nation’s trade deficit, they said.

So far this year, the Canadian dollar has traded as low as 70.07 U.S. cents on Jan. 20 and as high as 75.34 U.S. cents.