is the Canadian Dollar Undervalued?

The Canadian dollar is currently trading at less than US$0.79. However, some variables, such as the high price of oil and other commodities, suggest that it might be worth more. This Economic Viewpoint takes a look at different variables to determine whether or not the currency is undervalued. Undervaluation is sometimes viewed as useful in stimulating economic growth, but, in the current context of high inflation and supply shortages, a stronger currency could be an advantage. In particular, it could better play its role as an automatic stabilizer.