EclectEcon

I'm sure I am missing something, but why is it that strong economies cause the value of their country's currency to rise on the foreign exchange markets?

Doesn't a strong economy mean higher domestic incomes and hence more imports, thus putting downward pressure on the currency? Or is that being too Keynesian?

Or is it that the strength of the economy signals reduced risk for investors and hence attracts more inflows of foreign capital, driving up the price of the domestic currency?

Or is it that the [comparative] strength of the economy signals that the central bank will likely raise or keep interest rates above those in other countries? If so, why not wait until that actually happens?

At any rate, "strong economy" does not strike me as a very significant explanation for the recent run-up in the US price of a Loonie. Instead, to understand why the US price of Cdn dollar has risen, just look at the world price of oil. Like it or not, the Canuck buck is a petro-currency.