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

Ken Rutherford, left, and Rick Lord of Port Alberni receive honours from the National Model Railroad Association—Pacific Northwest Region for 40 years of dedication to the preservation and presentation of railroad history. (PHOTO COURTESY PHYLLIS RUTHERFORD)
Model railroaders from Port Alberni honoured for rail preservation

Ken Rutherford and Rick Lord put on annual model railroad meet in Nanaimo for 35 years

Former Alberni Valley Bulldogs’ associate coach Brandon Shaw has been named head coach of the Coquitlam Express, also of the B.C. Hockey League. The announcement was made May 12, 2021. (PHOTO SUBMITTED)
BCHL’s Coquitlam Express hire new head coach

Brandon Shaw leaves Alberni Valley Bulldogs for bench boss job

The Alberni Golf Club is located on Cherry Creek Road. FILE PHOTO
ALBERNI GOLF: Men’s club tees up for Mother’s Day

Next Sunday, May 16 will be the Stableford competition

AW Neill Elementary School in Port Alberni. (NEWS FILE PHOTO)
School district to choose new name for AW Neill Elementary in Port Alberni

School will not be renamed after Winston Joseph, says board

Carol Brown from the Alberni District Fall Fair committee, works on the online feed for the 2020 virtual Fall Fair on Saturday, Sept. 12, 2020. (SONJA DRINKWATER/ Special to the AV News)
Alberni District Fall Fair wins national award for innovation

Long-running traditional Vancouver Island fair went virtual due to COVID-19

B.C. Labour Minister Harry Bains in the B.C. legislature, May 13, 2019. (Hansard TV)
VIDEO: B.C. to provide 3 days of sick pay for COVID-19 absences

Province will support employers on cost, labour minister says

Provincial health officer Dr. Bonnie Henry updates B.C.’s COVID-19 situation at the B.C. legislature, April 29, 2021. (B.C. government)
B.C.’s COVID-19 rate creeps up again, 600 new cases Wednesday

One more death, 423 people in hospital with virus

B.C. Agriculture Minister Lana Popham takes questions in the B.C. legislature in 2017. (Hansard TV)
UPDATE: B.C. will fund another year of fresh fruit, vegetables, milk in schools

John Horgan government working on school meal program

Surrey RCMP is releasing sketches of a suspect in an “indecent act” at the Coyote Creek Elementary playground on April 30, 2021. Police said the suspect was clean-shaven “during some interactions” and on “other occasions had stubble outlining a goatee and mustache.” (Images: Surrey RCMP handout)
Vancouver mayor-elect Kennedy Stewart addresses supporters in Vancouver on Sunday, Oct. 21, 2018. THE CANADIAN PRESS/Darryl Dyck
Vancouver mayor says there’s no time to redo details of drug decriminalization plan

Kennedy Stewart says a federal election could see the small window of opportunity close on the city’s bid for an exemption from criminal provisions on simple possession of small amounts of drugs

These are just a handful of Vancouver Island’s missing person cases. Clockwise from top left: Lisa Marie Young, Lindsey Nicholls, Micheal Dunahee, Jesokah Adkens, Belinda Cameron and Emma Fillipoff. (File photos courtesy of family members and police departments)
Could Victoria skull fragment bring closure to an Island missing persons mystery?

Skeletal remains found in Greater Victoria have not yet been identified

Premier Mike Horgan received his first dose of a COVID-19 vaccine. (Facebook/John Horgan)
More than 50% of people eligible in B.C. have received 1st vaccine dose

‘We’ve made extraordinary progress together over the past few weeks,’ says Premier Horgan

The Independent Investigations Office of B.C. is investigating the shooting of a Tla-o-qui-aht First Nation woman in the Ucluelet First Nation community of Hitacu on May 8. (Black Press Media file photo)
Indigenous woman shot by police was holding a replica gun, says Ucluelet First Nation

Woman has been identified as a member of the Tla-o-qui-aht First Nation

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Most Read