Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday July 26, 2017
Rising loonie: The Winners
Buoyed by strong sentiment about the state of the Canadian economy, and getting the benefit of general weakness in the U.S. greenback, the Canadian dollar is now flying in territory it hasn’t seen in two years.
A recent interest rate increase by the Bank of Canada, and the expectation of more to come, has the loonie up about 10 per cent over the past six weeks. The Canadian dollar rose above 80 cents US on Monday before closing at 79.97 cents US.
“The obvious winner would be the average Canadian, just in terms of their travel plans or in terms of what they buy from the U.S.,” said Doug Porter, chief economist at Bank of Montreal.
The recent loftiness of the loonie makes it cheaper for Canadians to travel when they buy vacations priced in U.S. dollars.
For example, a one-week cruise out of Fort Lauderdale, Fla., priced at $878 US would have cost $1,203 Cdn when the loonie was trading at 73 cents US. With the loonie at 80 cents, that same cruise would cost $1,097 Cdn — meaning a consumer would save $106.
Similar to consumers, Canadian businesses that buy goods or services in U.S. dollars would wind up paying less for those items after factoring in the effects of our fluctuating currency.
For example, professional sports teams often pay player contracts in U.S. dollars. A stronger loonie means the revenue earned in Canadian dollar goes further when it comes to paying players in greenbacks. (Source: CBC News)