The currency of Canada is -- unfortunately -- the strongest in the world right now. This bit of good news is bad news for exporters, like myself, who benefit when the Canadian dollar is weak.
Two years ago, the Canadian dollar breached parity with the United States, for the first time since about 1975. In between, it had sunk as low as 63 cents in 1998. The difference is not as huge as the currency crisis that has hit Iceland, but here is the effect on us exporters:
In 1998, US$ was worth about $1.58.
In 2008, US$ was worth about $0.90.
In ten years, the value of our products fell by 43%. Or, more harshly for us, our income fell by 43%. Take an annual income of US$100,000:
In 1998, that was worth $158,000 to a Canadian
In 2008, that was worth $90,000.
Since 2008, the dollar weakened and then strengthened again. Last week, the Canadian dollar began pulling another 2008 when it rose above 98 cents. "98" is the cut-off for us exporters, because banks take 2 cents for themselves: 98 cents is our parity,when we receive $1 Canadian for each $1 American.
On Friday, the Canadian dollar showed some weakness; this week, we are watching it dance around the 98 cent mark, as illustrated below. (Above the red line, we lose on US currency; below the green line, we gain.)
Just a couple of years ago, it was smart to earn income in Euros, but now the Euro is weakening, too. Stupid strong Canadian economy!
Two years ago, the Canadian dollar breached parity with the United States, for the first time since about 1975. In between, it had sunk as low as 63 cents in 1998. The difference is not as huge as the currency crisis that has hit Iceland, but here is the effect on us exporters:
In 1998, US$ was worth about $1.58.
In 2008, US$ was worth about $0.90.
In ten years, the value of our products fell by 43%. Or, more harshly for us, our income fell by 43%. Take an annual income of US$100,000:
In 1998, that was worth $158,000 to a Canadian
In 2008, that was worth $90,000.
Since 2008, the dollar weakened and then strengthened again. Last week, the Canadian dollar began pulling another 2008 when it rose above 98 cents. "98" is the cut-off for us exporters, because banks take 2 cents for themselves: 98 cents is our parity,when we receive $1 Canadian for each $1 American.
On Friday, the Canadian dollar showed some weakness; this week, we are watching it dance around the 98 cent mark, as illustrated below. (Above the red line, we lose on US currency; below the green line, we gain.)
Just a couple of years ago, it was smart to earn income in Euros, but now the Euro is weakening, too. Stupid strong Canadian economy!
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