Price of and impact on cross currencies

Since oil is priced in USD, why does CAD (vs. JPY for example) go up as oil goes up? is it because once Candian oil companies receive the USD for their oil they then have to convert at least some of those USD to CAD to pay their workers and cover other expenses?

Canada has the third largest oil reserves in the world (depending upon whose statistics you read).

The population is only 35 million and the GDP is only $1.5 trillion (as reference the US GDP is $18.5 Trillion)

So any increase in the price of oil has a large influence on the country and its currency. The base currency used for trading is not relevant. To it’s south the US is hungry for oil and trans-border pipelines are possible.

The example of Japan is good because it is the complete opposite, an industrialized economy, an island nation, with no native oil supply so that all oil to Japan must be imported via ship.

I suppose that might be relevant, but I suspect that simply the reality that Canada produces more than 1,500,000 barrels of oil per day and that that’s “directly part of their international economy” might have more to do with it?

My opinions on “fundamentals” aren’t generally worth having, though, admittedly. But on a brighter note, someone who knows more than I do about this will doubtless reply soon enough. :wink:

And welcome to the forum.

PS: this article about the correlations between the oil price and relative currency values might interest you: [B]Oil & Currencies: Understanding Their Correlation (USD, UUP) | Investopedia[/B]

PPS I posted at the same time as Miss Croft, above, and without reading her post first … :8:

Jinx … Lol

Crude oil is priced in terms of US dollars by most importers, and so it’s not surprising that US dollars are likely the preferred currency for most energy-based transactions between Canada and the rest of the world. Furthermore, 97 percent of crude oil exported by Canada is shipped to the USA, and because crude oil exports account for a large portion of the US currency that is earned by Canada, movements in the price and the volume of crude oil have a significant impact on the flow of US dollars into the Canadian economy. In times of high oil prices, the amount of US dollars earned by Canada on each barrel of oil exported will be high, and therefore the supply of US dollars will be high relative to the supply of Canadian dollars, resulting in an increase in the value of the Canadian dollar. Conversely, when the price of oil is low the supply of US dollars will be low relative to that of the Canadian dollar, resulting in a fall in the value of the Canadian dollar.

This is actually copyed from Investopida as I didn’t know the answer and wanted to find out myself. After reading through the article, this section kinda best summed it up.

If oyou want to read the who article: How & Why Oil Impacts The Canadian Dollar (CAD) | Investopedia

I hope this helps you with your answer :slight_smile:

thank you all for your enlightening responses!!