Economists say the Canadian dollar is at a ‘sweet-spot’ after hitting a three-year-high yesterday, reaching a point where it benefits consumers but doesn’t hurt businesses too much. THE CANADIAN PRESS/Jonathan Hayward

Economists say the Canadian dollar is at a ‘sweet-spot’ after hitting a three-year-high yesterday, reaching a point where it benefits consumers but doesn’t hurt businesses too much. THE CANADIAN PRESS/Jonathan Hayward

Rising loonie hits ‘sweet spot,’ likely to climb further: economists

The loonie traded for 81.34 cents US Thursday, the highest level since February 2018. It’s been above 80 cents US since last week.

Economists say the Canadian dollar is at a ‘sweet spot’ after rising for seven straight days to top 81 cents US, a point where it benefits consumers but doesn’t hurt businesses too much.

The loonie traded for 81.34 cents US Thursday, the highest level since February 2018. It’s been above 80 cents US since last week.

Colin Cieszynski, chief market strategist with SIA Wealth Management, said it is important to remember that the Canadian and U.S. dollars were at parity only a decade ago, so businesses won’t be hurting too hard just yet.

“It’s not a huge negative for business yet. In and around the high 70s and low 80s has historically been a sweet spot for the dollar,” said Cieszynski.

“Canadian businesses get to benefit on the dollar, but consumers aren’t getting crushed on the exchange rate.”

He pointed out that Canadians still buy a lot of products imported through from the United States, even with current pandemic-related border restrictions in place.

Analysts nonetheless pointed out that COVID-19 is disrupting some of the usual consumer trends around a strengthening loonie, such as its effect on cross-border shopping and tourism.

With the increased use of e-commerce in the retail sector, BMO Financial Group chief economist Douglas Porter said Canadians may more often look to U.S companies when shopping online.

Porter said he believes the strength of Canadian commodities like lumber could continue to drive up the loonie.

“There’s a lot of things that are driving the currency, but probably Number 1 is just the widespread strength we’re seeing in commodity markets,” said Porter, saying high wheat and copper prices have contributed to the strengthening dollar.

“All kinds of things that Canada exports are at record highs or at multi-year highs.”

He said the current exchange rate may not yet represent the full strength of the Canadian economy, meaning it could have further to go in the short term.

Alan Arcand, chief economist with the Canadian Manufacturers and Exporters, said the short-term effect on manufacturers is ambiguous because they both import and export goods as part of their process.

But there could be impacts on manufacturers from a higher loonie down the road.

“The negative impact is generally gradual and long-term, said Arcand.

“It’s not really going to affect near-term production decisions, it’s more like it affects long-term investment decisions,” he said, playing a role in decisions about where it’s cheaper for businesses to invest.

Both Arcand and Cieszynski shared the view that the current economic climate favours short-term rises in the loonie.

Cieszynski said Canada’s natural resource industry will continue to benefit as the world looks to re-open thanks to ongoing vaccination efforts.

“The most important thing is the crisis stage of COVID appears to be ending and the focus is turning more towards opening and recovering, and that helps the loonie,” said Cieszynski.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

economy

Just Posted

Email letters to the editor to editor@northislandgazette.com and we will publish online and in print.
LETTER: Port McNeill councillor responds to May 12 North Island Rising column

‘council raised residential taxes for no reason and I stand by that statement’

The seasonal Search and Rescue program will run between May to September. ( File photo/Canadian Coast Guard)
Coast Guard Inshore Rescue Program starting up next week

Teams have protocols in place to ensure COVID-19 safety

Shearwater is located in the Great Bear Rainforest on the West Coast of B.C. (Cariboo Chilcotin Coast Tourism Association photo)
Heiltsuk Nation buys historic Shearwater Resort and Marina

Chief Marilyn Slett said Heiltsuk Nation has always valued its relationship with the company

B.C. Centre for Disease Control data showing new cases by local health area for the week of May 2-8. (BCCDC image)
Vancouver Island COVID-19 local case counts the lowest they’ve been all year

On some areas of Island, more than 60 per cent of adults have received a vaccine dose

A nurse gets a swab ready to perform a test on a patient at a drive-in COVID-19 clinic in Montreal, on Wednesday, October 21, 2020. THE CANADIAN PRESS/Paul Chiasson
Island’s daily COVID-19 case count drops below 10 for just the second time in 2021

Province reports 8 new COVID-19 cases on Vancouver Island Wednesday

Daily confirmed COVID-19 cases reported to B.C. public health, seven-day rolling average in white, to May 12, 2021. (B.C. Centre for Disease Control)
B.C. preparing ‘Restart 2.0’ from COVID-19 as June approaches

Daily infections fall below 500 Friday, down to 387 in hospital

Sinikka Gay Elliott was reported missing on Salt Spring Island on Wednesday, May 12. (Courtesty Salt Spring RCMP)
MISSING: Salt Spring RCMP find woman’s car, still seek Island resident

Sinikka Gay Elliott is 5’3” with a slim build and dark brown short hair

A Saanich man received almost 10 years in Supreme Court in Courtenay for a shooting incident from 2018. Record file photo
Shooting incident on Island nets almost 10-year sentence

Saanich man was arrested without incident north of Courtenay in 2018

Bradley Priestap in an undated photo provided to the media some time in 2012 by the London Police Service.
Serial sex-offender acquitted of duct tape possession in B.C. provincial court

Ontario sex offender on long-term supervision order was found with one of many ‘rape kit’ items

Rich Coleman, who was responsible for the gaming file off and on from 2001 to 2013, was recalled after his initial testimony to the Cullen Commission last month. (Screenshot)
Coleman questioned over $460K transaction at River Rock during B.C. casinos inquiry

The longtime former Langley MLA was asked about 2011 interview on BC Almanac program

Steven Shearer, <em>Untitled. </em>(Dennis Ha/Courtesy of Steven Shearer)
Vancouver photographer’s billboards taken down after complaints about being ‘disturbing’

‘Context is everything’ when it comes to understanding these images, says visual art professor Catherine Heard

Trina Hunt's remains were found in the Hope area on March 29. Her family is asking the public to think back to the weekend prior to when she went missing. (Photo courtesy of IHIT.)
Cousin of missing woman found in Hope says she won’t have closure until death is solved

Trina Hunt’s family urges Hope residents to check dashcam, photos to help find her killer

Chief Public Health Officer Theresa Tam listens to a question during a news conference, in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Restrictions will lift once 75% of Canadians get 1 shot and 20% are fully immunized, feds say

Federal health officials are laying out their vision of what life could look like after most Canadians are vaccinated against COVID-19

Most Read