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A large part of why the CAD has been weakening (against the USD) is because the value is crude oil has been falling, and Canada is a big exporter of oil.

But this oil doesn't belong to Canada. It belongs to the private companies that extracted the oil from the ground, such as Suncor Energy, EnCana Corp, and Canadian Oil Sands.

So if the value of crude oil falls, then these oil companies become less valuable because their inventory of oil decreases in value.

If the oil company's oil-inventory decreases in value, then the company's equity decreases (as "assets = equity - liabilities").

If the oil company exports this less-valuable oil, they'll receive less money for it, as they'll have to sell it for a low-than-usual price.

So if the oil company's equity decreases, then the company's shares decrease in value, leading to a decrease in the company's market capitalization.

Where does the drop in the value of the Canadian dollar come into play?

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  • $\begingroup$ I actually didn't even know CPI was a factor to consider here. $\endgroup$
    – Nixu
    Oct 9, 2015 at 3:30
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    $\begingroup$ Yeah! Your question is basically the same thing, minus a step. The stuff (oil) Canada exports is worth less than before, so there is less foreign demand for Canadian stuff in terms of foreign currency, so the value of the Canadian currency is lower relative to foreign currencies. That's it! It actually kind of doesn't matter who owns the oil, so long as they are converting the cash received for the oil into the domestic currency. $\endgroup$
    – dismalscience
    Oct 9, 2015 at 3:41

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