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

Jill Mackenzie carefully replaces books on the shelves at the Houston Public Library. (Angelique Houlihan photo)
District approves annual library grant

Craft kits featured for summer reading club

The tradition of Houston Christian School grads giving Bibles to incoming kindergarten students will take place this year, but outdoors and in a modified fashion. (File photo)
Houston Christian School grad day is June 24

Grads themselves have set tone for the day, says teacher

Scott Richmond will be starting as the new vice principal for HSS and TSE. (Submitted/Houston Today)
Houston gets a new vice principal

Scott Richmond takes over from Dwayne Anderson who moved to Smithers

A Pacific Salmon Foundation grant of $3,000 is going towards the tree plantations. (Cindy Verbeek photo/Houston Today)
550 trees planted in Houston through A Rocha

Houston Christian School students and volunteers help with the tree planting

Currently the Houston station has 16 paramedics, two ambulances and one community paramedic vehicle. (File photo)
Retirement of longtime paramedics worries Houston community

“No loss of service,” assures BC Emergency Health Services

A small pod of Pacific white-sided dolphins pass by close to shore in Campbell River June 16, 2021. Still capture from video courtesy of Kimberly Hart
VIDEO: Dolphin sunset captured from Vancouver Island shore

Spectacular setting for view of travelling pod of Pacific white-sided dolphins

British Columbia’s premier says he’s received a second dose of the Oxford-AstraZeneca COVID-19 vaccine. (Twitter/John Horgan)
B.C. premier gets 2nd dose of AstraZeneca COVID-19 vaccine

John Horgan shared a photo of himself on social media Friday afternoon holding a completed vaccination card

A lotto Max ticket is shown in Toronto on Monday Feb. 26, 2018.THE CANADIAN PRESS
No winning ticket sold for Friday’s $70 million Lotto Max jackpot

The huge jackpot has remained unclaimed for several weeks now

Police are asking for public assistance in locating Anthony Graham who has been charged with the murders of Kamloops brothers Carlo and Erick Fryer. (RCMP photo)
2 charged, suspect at large in killings of B.C. brothers linked to gang activity: RCMP

Kamloops brothers Erick and Carlo Fryer were found deceased in May on a remote Okanagan road

Albert Health Minister Tyler Shandro and Alberta Premier Jason Kenney unveil an opening sign after speaking about the Open for Summer Plan and next steps in the COVID-19 vaccine rollout, in Edmonton, Friday, June 18, 2021. THE CANADIAN PRESS/Jason Franson
Alberta 1st province in Canada to lift all COVID-19 public health restrictions

70.2% of eligible citizens 12 and older in the province have received a dose of the vaccine

Fraser Health registered nurse Ramn Manan draws a dose of the Pfizer COVID-19 vaccine into a syringe at a walk-up vaccination clinic at Bear Creek Park, in Surrey, B.C., on Monday, May 17, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Honour our fathers’ with COVID-19 vaccine protection, B.C. urges

109 new cases Friday, 75 per cent of 12 and up immunized

(Paul Henderson/ Chilliwack Progress)
Trutch Avenue in Chilliwack to be renamed to remove racist taint

New name to have Indigenous significance as Chilliwack takes new step toward reconciliation

Canadian Prime Minister Justin Trudeau is seen during a joint news conference following the EU-Canada Summit, in Brussels, Belgium, Tuesday June 15, 2021. Trudeau says Canada is on track now to have 68 million doses delivered by the end of July, which is more than enough to fully vaccinate all 33.2 million Canadians over the age of 12. THE CANADIAN PRESS/Adrian Wyld
Vaccine deliveries enough to fully vaccinate all eligible Canadians by end of July

Three in four eligible Canadians now have their first dose, nearly one in five fully vaccinated.

Most Read