The Dropping Loonie: Who Wins and Who Loses When the Loonie Slides

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Canadian cross-border shoppers and travelers are some of the biggest losers when the Canadian dollar is low because their money doesn’t go as far in the U.S. On the flip side, a weak Canadian dollar lures U.S. consumers north, which is good for certain sectors of the Canadian economy, such as tourism and real estate.

Canada’s professional sports teams are hurt by a weak dollar because their ticket sales are in Canadian dollars, while other expenses such as players’ salaries and mandatory revenue sharing are paid in U.S. dollars. A low Canadian dollar played a role in the loss of Quebec City’s and Winnipeg’s hockey teams in the mid-1990s when both teams fled south of the border.

The Canadian film industry is another sector that benefits from a weak dollar because it helps the industry lure Hollywood productions north. Companies that export goods to the U.S. or that have a lot of international sales also benefit from a weak Canadian dollar. Conversely, when the loonie is strong, it is more expensive for Canadian manufacturers and exporters to sell their goods south of the border.

According to the Canadian Manufacturers and Exporters, a strong Canadian dollar is never good for business, but massive fluctuations are worse, which is why many companies have been exploring ways of minimizing the impact of currency movements, such as pricing products in the currencies of the countries where they do business, or investing in financial instruments that hedge against exchange-rate fluctuations.

 

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