First off, keep in mind that when trading currencies, one must look at the nominal exchange rate. You can see what a unit of one currency costs in terms of another at
www.xe.com/ .Right now, the CAD and USD are almost exactly at par, with the USD worth slightly more at the moment. There are a number of market effects that impact the value of the dollar, including interest rates, the demand for the currency, etc. For instance, the United States have been cutting interest rates considerably for the last while, which in theory helps to jumpstart the economy.
As interest rates are lowered, it becomes cheaper to borrow money, and there is less incentive to save money, therefore the demand for loanable funds goes up. Given that the United States is believed to be nearing a recession (Which is essentially a significant dip in economic activity, or a period of decline in a nation's Gross Domestic Product for two or more consecutive quarters in a year) there is incentive to give the economy a boost.
When interest rates are lower, firms in theory will use their own funds (See retained earnings) or borrow in order to invest in capital (i.e. infrastructure amongst other things). This injects a considerable amount of liquidity (Money) into the system, which tends to cause concerns over what's known as inflation, which is a situation when prices rise over time, generally due to an increase in the money supply.
When there are concerns over inflation, the dollar will fall in value which has been one area of concern in the United States. In many cases, it is not so much that every currency in the world has strengthened, but that the USD has weakened. The United States also has a tremendous debt, the credit crunch and the subprime mortgage issue which does not help matters.
On the other hand, the Canadian economy is relatively healthy, and while there are some concerns over a recession in the United States causing problems in Canada given their close relationship, Canada is doing relatively well at the moment. Canada has also been cutting interest rates as of late, which not only helps jumpstart the Canadian economy, it is also is linked to the USD/CAD issue. A strong dollar has good points and bad points. Yes, it is now cheaper for Canadians to visit and spend money in the United States, however, when the Canadian Dollar is strong, it makes Canada's exports (Canada exports a large amount of goods) more expensive on world markets, which hurts the manufacturing sector.
When you are looking at equalizing prices, you will often hear people talk about the "Law of One Price" which has been shown at times not to hold. It basically says that the exchange rate will equalize the prices of tradable goods between two countries, measured in a domestic currency ignoring transport costs, etc. However, when you look at prices, for instance of cars, clothing, magazines, and other goods, it is sometimes cheaper to buy them in the United States, in some cases by a considerable amount. While the pricing gap has narrowed between nations, it is still there.
Also of note, the CAD is very dependent on commodities, meaning that if prices of commodities are on the rise, it will generally help the CAD, and vice versa during a fall in commodity prices.
Hope this is of help to some.
i don't really understand what you mean...
