this post was submitted on 11 May 2025
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The value of the Canadian dollar is dependent on the CPI only to the extent that the market relies on the CPI to assess what the market is willing to pay for the dollar. Interest rates probably have a greater influence. The BoC can influence the exchange rate of the dollar to a limited extent by influencing supply/demand through the purchase/sale of Canadian debt instruments, but that is indirect through interest rates. China can influence the price of the Canadian dollar by either selling off or buying Canadian dollars in its foreign currency reserves.
In point of fact, China COULD theoretically tan the American dollar by selling off the trillion it has in American currency reserves, but that would be a one-shot weapon and it would also cause pain in China, since China now owns so much of American industry.