One of the casualties of the market volatility this week is the Canadian dollar. At the close of trading yesterday it was sitting below USD 73-cents.
Like most stories, there are two sides to this coin. If you’re holding US-based stocks in your RRSP or pension plan, you did better than most because the lower Canadian dollar meant stocks denominated in American currency were worth more simply because of foreign exchange.
If you’re looking to holiday in the south or want to buy things like fresh fruit or vegetables, well, that’s the other side of the coin….it costs more.
The reason our dollar dropped is fairly straight forward. In a turbulent market, global investors have a better feeling about the economic stability of Trump’s America than Trudeau’s Canada. So they sell Canada to buy US. Sure, it costs more but they think it is worth it because we may not be done our slide.
And with calls for the Bank of Canada to lower interest rates to encourage spending, that will only compound the problem as the dollar tends to fall when interest rates go down.