The Forex Evolution

• It has been estimated that the world's most active exchange rates can change up to 18,000 times during a single day. There was a time when this price changed only once in many years. The years became months, then days, then hours and now seconds. These price movements have allowed traders to go in and out of the market at a pace not possible just a few years ago. Active modern day traders can go in and out of the forex market 200 times in a single day and take a small profit each time they perform these trades.
  
  

• In spot forex trading a typical trading day will start in New Zealand and Sydney, followed by Tokyo, Hong Kong and Singapore. These markets are already well into their stride when trading begins in parts of the Middle East. As Tokyo begins to wind down, the European markets open for the day. The late European afternoon sees the start of business in New York, and as the day reaches its end in the United States, it is time for the Western Pacific countries to open their doors once again. 
  
  

• The global nature of this market, its interconnectedness, means that short-term speculators in the foreign exchange market actually have three "trading days" in each 24-hour day. There is roughly a "day" each for the Asian time zone, European time zone and American time zone. Unlike in other markets, currency traders do not have 16 hours to contemplate their next move or the advantages of herd-like behaviour at the open of a market.

Canada

Spot

Economic Indicators for Canada

Economic Overview

Canada has the twelfth largest economy in the world, with a GDP valued at US$1.077trl in 2005. As a prosperous and technologically advanced industrial society, Canada is characterized by its market-oriented economic system, production patterns and affluent living standards. Since the mid-twentieth century, the growth of the manufacturing, mining and service industries have transformed the previously rural economy to one that is industrial and urban. The service sector is very important to the Canadian economy, since nearly 75 percent of the labor force is employed in a service-oriented occupation.

Solid fiscal management has resulted in a long-term budget surplus, which is substantially reducing the $600.76bln national debt, although managing the rising cost of Canada’s publicly-funded healthcare system is the subject of many political and fiscal debates.

Canada has a trade surplus of $47.1bln, and a substantial surplus with its main trading partner, the U.S., which imports more than 85 percent of Canada’s exports. The 1989 U.S.-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA) led to increased trade and economic integration with the U.S. Canada’s major exports include motor vehicles and parts, industrial machinery, chemicals, plastics, wood pulp, timber, petroleum and natural gas. With 178.9bln barrels of proved oil reserves, which is the amount of commercially recoverable petroleum from known reservoirs, Canada has the second most in the world, behind Saudi Arabia.

Economic Policy Makers and Tools

The Bank of Canada (BOC) was established in 1934, and has set Canadian monetary policy since 1938. The Bank of Canada maintains the value of the Canadian dollar by ensuring price stability, which is maintained by adhering to an inflation target agreed upon with the country’s Department of Finance.

The Bank of Canada carries out monetary policy by influencing short-term interest rates through raising and lowering the target for the overnight rate. The BOC announces any changes to the interest rate at eight scheduled dates per year. The dates tie in with the Bank of Canada's analysis of economic developments and their effect on future inflation.

The BOC is closely involved with Canada's financial markets through its activities in the foreign exchange market, its marketing and management of government securities, and its influence on interest rates via the target for the overnight rate.

The Department of Finance’s economic and fiscal policy branch monitors economic developments of major trade partners. The branch prepares monthly fiscal and quarterly economic reports, and plays a major part in determining the federal budget. The department’s financial markets division provides policy analysis and advice on governing the Bank of Canada, supplying and circulating currency, and developing capital markets.

In 1994, the BOC began using the overnight rate as its key monetary policy instrument instead of the previously followed bank rate. This shift followed after the BOC introduced a 50-basis-point operating band for the overnight rate, which is the rate at which major participants in the money market borrow and lend overnight funds among themselves. The Bank of Canada uses daily adjustments in the level of settlement balances to set a target level for the overnight rate within the operating band. With the introduction of the 1999 Large Value Transfer System, the target for the overnight rate was defined as the midpoint of the band, or 25 basis points below the bank rate. Because the target affects the interest rates that financial institutions charge each other from day to day, it usually affects other interest rates, including mortgages and consumer loans.

Foreign exchange market intervention is conducted by the BOC by using the government's supply of foreign currencies in the exchange fund account. If the Bank of Canada wants to offset a decline in the value of the Canadian dollar, then it will buy Canadian dollars in foreign exchange markets, exchanging other currencies, most often U.S. dollars. In turn, the increase in demand for Canadian dollars helps support or strengthen its value. To make sure that the BOC's purchases do not create a shortage of Canadian dollars, which could increase interest rates, it neutralizes its purchases by depositing the same amount of Canadian dollars in the financial system. The opposite process can be applied to slow the appreciation of the Canadian dollar.

The BOC releases a number of publications that are read for their impact on the Canadian economy. The quarterly Monetary Policy Report and Update provides a detailed summary of the BOC’s policies and strategies, the country’s economic environment and the implications these issues have on inflation. The biannual Financial System Review provides a detailed review of developments in the financial system and an analysis of financial policy directions. In addition, the BOC releases key banking and money market statistics each Friday afternoon.

Characteristics and Trends

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