Are you loonie?

One of the biggest stories this year in Canada has been the rise of the Canadian dollar. It is currently trading at $1.06 US. No one would have thought this would be possible when the dollar was trading at above sixty cents US five years ago. The rise in the price of oil (almost $94.45 US a barrel) and strong commodities has helped pushed the loonie above par against the American greenback. However, the biggest reason of this surge is due to the weakness in the US dollar, which has been caused by a slumping housing market.

In recent months, there has been a public outcry from consumers over the lack of adjustment in retail prices in Canada. Many consumers are spending their money across the border in Buffalo, where wait times are about two hours. Financial advisor's are advising people to exchange their money before they cross the border to avoid the "American exchange rate, i.e. one-for-one. You will also find out that when you exchange money at the bank, they will charge you a 2.5% service charge, so you will never get the current rate.

A high loonie is bad news for some people, such as those who are in the manufacturing sector, which is an export-drive business. Importers now found the price of goods in Canada are more expensive and will look at other places to import similar goods. A recent article in the Toronto Star talked about the effect of salaries on European basketball players who are paid in US dollars. The Toronto Raptors center, Rasho Nesterovic signed an 8 million dollar per year contract which was paid in US dollars two years ago. He spends his off-season in Europe, so he converts that money into Euros. That same contract is now worth 1.5 million dollars less after the exchange rate.

The majority of Canadians feel a sense of pride over the rise of the loonie. When Canadians visited the US previously, Americans always felt that their currency was superior to the Canadian dollar. Now, the tables have turned, and it is not clear how long it will lost. However, I will not stay silent and will let our neighbors to the south know the value of their dollar :)