The Canadian dollar has climbed to record breaking levels in the past few months. This article looks at the benefits and the drawbacks for Canada's economy.
Cheaper visits to the United States and to other foreign countries are being enjoyed by many Canadians lately because of the loonie's meteoric rise. Canadian firms looking to buy businesses in the U.S. can and have been doing so more easily and U.S. imports are less expensive which good news is for any company that brings American goods into Canada. While many are enjoying the economic advantages of the high Canuck dollar, there are others who aren't so happy. Let's look at both sides of the coin and see who is reaping the benefits from the stronger Canadian loonie and who isn't.
Travel companies based in Canada
The stronger loonie means Canadian tourists don't have to stay home anymore. Finally they are enjoying more trips to Europe and the U.S. than five years ago, and travel retailers are seeing a bigger bottom line, especially all the major airlines.
Canadian banks
Last October the Toronto Dominion Bank took over Commerce Bancorp Inc. of New Jersey for $8.5 billion US. In a dramatic reversal of mergers and acquisitions, Canadian financial institutions are now showing an increasing appetite for buyouts in the U.S. and abroad. The Royal Bank of Canada spent $2.2 billion US for Trinidad-based RBTT Financial Group. The Bank of Montreal recently scooped up an asset management firm in the United Kingdom called Pyrford International PLC. Canadian firms with more muscle like Manulife Financial and EnCana are also aggressively expanding into the U.S. market.
Cross border shoppers
For those who are living within driving distance of cities like Buffalo and Detroit it's much cheaper to buy supermarket items and gasoline on the American side of the border. Canadian consumers have also commented that U.S. retail outlets often have a greater variety of products to choose from than malls north of the border.
Retailers based in Canada
As long as prices are cheaper in the U.S., Canadian shoppers will continue to head south for all kinds of different products, from books to clothing to music. Retailers in Canada are refusing to lower prices to boost domestic demand and will therefore lose more business.
The manufacturing sector
The high Canadian dollar is bad news for anyone working in the lumber, electronic or automobile industries. Since most of their products are heading for the U.S., these goods will be less affordable to Americans and sales will go down. It also means Canadian manufacturing jobs will be lost.
Charity groups
Raising funds will be tough for organizations trying to aid low income families and the homeless. A radio station in Hamilton, Ontario reported the United Way was $175,000 short of its fundraising target this year. Local manufacturers are donating less cash because of the dollar's rise.
