Exchanging Loonies for Dollars

 
USD/CAD exchange rate in the past 10 days

Yesterday was a historical event for the Canadian dollar as it reached par with the greenback. Since then it's been flirting with the USD, at times going above and below the mark. The last time the loonie was at par with the dollar was back in November of 1976. It bottomed out at around $0.66USD in 2002, but has gained ground since then. The weakening U.S. economy and the strengthening of Canada's economy has led to the near currency equivalent.

This is both good news and bad news for Canada. Canadians can take advantage of the exchange rate by traveling and shopping in the U.S., but this means the CAD will be invested in the U.S. economy rather than its own. Although the value of the loonie has risen considerably in the last six years, retail prices have not changed meaning consumers are paying a lot more for comparable goods than the U.S. Canadian manufacturers also have a disadvantage with the value earned on their exports to the U.S. Although this may be good news for the loonie, it does come at a price.

Some Canadian economists forecast that the loonie will eventually rise in value over the dollar, possibly at five or ten cents above. That may be possible, but more likely to be short term once the U.S. economy turns around.