Foreign exchange markets buy and sell money, and they operate like other asset markets. In the short run, the price of foreign exchange is primarily determined by expectations. If investors expect the Canadian dollar to depreciate, they will sell Canadian dollars. And if many investors are selling Canadian dollars, then, indeed, it will depreciate. Like any other asset, Canadian dollars must ultimately have some fundamental value that anchors expectations.
Economists believe that prices of goods represent that anchor.
In the long run, the Canadian dollar will only depreciate against the U.S. dollar if Canada's inflation rate is persistently higher than the U.S.'s. A bubble occurs when expectations do not have an anchor. Expectations are self-fulfilling. If the depreciation of the Canadian dollar were a bubble, it could explain why producers have not abandoned Canadian markets. Bubbles eventually burst, and when they do there can be huge swings in asset prices.