Exchange rates and external imbalances  According to the indicator calculated by the Federal Reserve, between February 2002 and January 2005 the effective exchange rate of the dollar fell by 15 per cent in both nominal and real terms. Over the same period the euro appreciated by 24 per cent in nominal terms and by 21 per cent in real terms.
However, the post-crisis recovery has been frustratingly slow – we have called it serial disappointment – and bond yields and policy interest rates have been unusually low for a long time. In this context, these financial vulnerabilities have built up over time. Fortunately, Canada’s economy is showing the first signs of a broadening recovery.