Falling Canadian Dollar

by Mr. Cheap

The Canadian dollar has been plunging recently.  I’m not into Forex trading (its a zero-sum game, so with transaction fees and other savvy people in the marketplace, I don’t see it as a reliable investment), but currency exchange rates affect many Canadians.

Years ago I lived in the US and the Canadian dollar was worth about $0.60 US.  Things seemed much cheaper whenever I’d visit Canada (I remember being shocked at how much more DVDs cost up here after I’d factored in the exchange rate).  When we briefly had the dollar worth more than the American dollar (and while it was around parity), it was a strange feeling being able to purchase more for a Canadian dollar (or to be able to convert equally).  I think a lot of ex-pat Canadian tech workers were shocked at their American salaries, in part because they were very nice after being exchanged into Canadian dollars.

For importers, they now have to pay a lot more when they buy abroad.  This will eventually start translating into higher prices on goods brought into Canada (books, most manufactured goods, etc).  With the lower Canadian dollar, exporters will now be able to make more for everything they sell abroad, so this is good news for Canadian manufacturers and anyone selling resources outside of Canada.

Tourism will get more expensive when we travel outside of Canada, but tourists COMING to Canada will get a better deal (so hopefully this segment of the economy will improve).

Those of us who own American stocks: we’ve just got a nice boost to our portfolio value.  From both the new, higher exchange rate if we sell and on any dividends paid (in American currency).  Telly is going to laughing more than any of us, as she lives in Canada but works in the US (good trick right now if you can manage it).

For purchases WITHIN Canada (say buying a meal at a restaurant that uses locally produced ingredients or buying a Canadian newspaper), nothing should really change.

Has the drop in the Canadian dollar affected you?  Are you going to be living life any differently, within the next 6 months say, because of the change?

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