Recently, we have watched the deterioration in financial conditions extend beyond the subprime market. Investors appear to have reassessed their outlook and their tolerance for risk, especially for structured financial products and for securities of highly leveraged firms. Bond spreads – especially those for speculative-grade debt – widened substantially in June and July, and the volatility of equity prices increased as well.
But since that time, the Canadian dollar has moved well above that range. Indeed, since the April Report, the Canadian dollar has been significantly stronger than other major currencies against the U.S. dollar.