Rapidly falling oil prices are causing quite the stir in the prices of commodity-based currencies, such as the Canadian dollar, the Norwegian krone, the Russian ruble and others. The latest batch of volatility has triggered a decline of the Canadian dollar’s exchange rate to its US counterpart to the lowest level since 2009.
Trading today around 1.20 to the US dollar, only a couple of years after reaching parity, has driven the Loonie’s appeal lower in light of the prospective economic challenges which a protractedly low price of oil is posing for the Canadian economy.
The Canadian self-regulatory organization in charge of the regulatory environment in the country is one of the strictest in the world and has a very unique structure. The Investment Industry Regulatory Organization of Canada (IIROC) is at the center of the framework and regularly updates foreign exchange margin trading requirements depending on FX volatility.
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IIROC has issued a revised table for all margin requirements of different currency pairs, with the notable change in the leverage ratio of the US dollar to the Canadian dollar and the Norwegian Krone versus the US dollar.
Starting from January 15th, the margin requirements on the USD/CAD pair will be raised from 1.6% (1:62) to 1.9% (1:52), while on the USD/NOK, forex traders in Canada will have to put up 3.40% or 1:29 (up from 3.00% or 1:33).
The list is updated by IIROC every time there are changes to the margin requirements in the most popular traded currencies. The organization determines the appropriate FX margin requirements according to a certain volatility threshold which is different for every currency group.