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Who are the Market Participants?
ExportersThis group consists of many of Canada's largest companies. Within group you find a diverse range of companies exporting goods and services from Canada to the rest of the world. Canada's export volumes give an excellent indication of the volumes of foreign exchange transacted by the sub sets of this group with resource sector companies taking centre stage. In general exporters have a positive impact on the value of the Canadian Dollar.
ImportersThis group of companies and individuals uses the foreign exchange markets to purchase foreign currency to make payments for the goods and services they have bought in other countries. In general they have a negative impact on the value of the Canadian Dollar.
Canadian Fund ManagersThis industry has burgeoned over the last two decades underpinned by a regulatory environment that encourages private household saving. The net effect of the group depends on the investment decisions they make but in general as the industry grows they have been investing heavily offshore which generates a negative impact on the Canadian Dollar. However they can hedge these investments which often sees them enter the market as buyers of forwards contracts and options.
Global Fund ManagersThis group's influence changes depending on their interest in Canadian asset markets. During periods where Canadian stocks and bonds are attractive, Canada gets substantial allocations of global capital which drives up the value of the Canadian Dollar. However when they wish to hedge existing investments in Canada this can generate selling flows.
Central BanksIn Canada the Bank of Canada generally lets the market determine the value of the Canadian Dollar however there are a few exceptions to this policy. Firstly the Bank of Canada will intervene to buy or sell Canadian Dollars if they believe it is substantially under or overvalued and that it is having a negative effect on the economy.
Other Government AgenciesMany government agencies have foreign exchange risk either as exporters, importers or borrowers.
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