The Canadian Dollar has hit a 2-year low point as it falls to 75 US cents, amid fears of a global recession.
The current exchange rate is the lowest since October 2020.
It comes as the World Bank warned that the hiking of interest rates by central banks across the world to combat inflation, could lead to a global recession.
The U.S. Federal Reserve is expected to increase its benchmark rate by at least 75 basis points to 3.25 percent due to inflation.
Higher interest rates attract investors wanting to park their money there, leading to the growth of the US Dollar.
“There’s been an absolute flood of money into the U.S. dollar because it is the pre-eminent safe haven and because the U.S. economy is much stronger than everywhere else,” says Adam Button, chief currency analyst with foreign exchange firm ForexLive.
The Bank of Canada this month raised its key interest rate to 3.25 percent, one of a number of hikes it has already made this year as part of a strategy also employed by other central banks to slow inflation.
“It’s going to be more expensive to buy stuff and your dollar isn’t going to go as far,” Lydia Miljan, a professor of political science at the University of Windsor, told CTV National News.
“The cost of borrowing is higher and so obviously that is going to put in some recessionary pressures.”
The low value of the Canadian dollar also may affect food prices, which have also remained high due to inflation.
“We do import a lot of food from abroad during the winter to feed ourselves and if the loonie drops even further, it will impact the buying power of our importers,” Sylvain Charlebois, director of Dalhousie University’s Agri-Food Analytics Lab said.