Is Stronger Loonie Bad For Canada?

One of the biggest stories in Canada over the past month or so has been the rise of the Canadian dollar. Slowly creeping up on parity to its U.S. counterpart, the loonie currently sits at 97.2 cents U.S., according to reports from The Canadian Press.

Interestingly though, the idea of a stronger value for the Canadian dollar may pose a problem to the economic recovery of the nation. One reason for this is the idea that Canadian shoppers may be thinking of crossing the border into the United States to do more of their shopping. Especially since the holiday season is approaching, more south-of-the-border shopping would result in a smaller-than-normal boost in sales for local retailers.

In addition, Prime Minister Stephen Harper said today in Vancouver that a strong loonie may make Canadian exports more expensive in foreign markets, creating greater difficulty with competition.

The Canadian dollar, however, has gained strength due to the growing health of the Canadian economy as of late. Our nation's financial climate, says Harper, is stronger than nearly every other industrialized country in the world.

Says the Prime Minister: “As we said before, we're not out of the woods. There are many risks…and obviously the value of the Canadian dollar is a risk to recovery. I don't think it's a risk to choking off the recovery but if it goes up too rapidly it does have difficult effects on our economy.”

It would seem then that Canadians should be encouraged to spend their money at home. To avoid having Canadian retailers suffer as a result of the stronger loonie, it is likely that many of them will be proposing greater bargains during the holiday season to keep consumers from heading south for a shopping excursion.

Mark Beesly, of the Retail Council of Canada spoke to 680News about this issue: “They're all vying for consumers dollars and they'll continue to try to keep those people attracted to Canadian stores.”

The rise in the Canadian loonie is a great one. Reports show that it has risen from a low of 76.33 cents U.S. in March to its current level up over 97 cents U.S. That is a rise of nearly 26 per cent. Some economists are predicting the loonie will be on par with the American dollar as soon as next week.