Currency trading creates a kind of historical record: what a dollar is worth at any particular time. The Canadian dollar was way up near parity with the American dollar back in the 1970s, then it went falling falling endlessly into the $0.65 range. Rose a bit in the late 1980s, supposedly a quid quo pro for free trade, then down again.
Now it's heading back to parity. Well, yes, say the experts, of course. Canada has sound fiscal policy, shrinking debt loads, strong demand for its commodities, things like that. The world wants all that, so the dollar is rising.
But ...Canada has had all those things for most of a decade, and for most of that time the market yawned. You have to conclude the money boys were probably undervaluing the dollar five years.
They are probably overvaluing it now, as it rises toward parity. The fast money boys who set markets today don't know what the right level is. The market is not that smart.
Still, remember Keynes. The market's ability to remain irrational is greater than your ability to remain liquid.
