So the Canadian dollar has crested above 80 cents U.S. That's an 11-year-plus high for the loonie. A few years ago, the Canadian loonie used to be worth around 65 American pennies. When I was a kid in the 1970s, the Canadian dollar was worth a lot more than the U.S. dollar — $1.10 or $1.20 U.S. — I don't exactly remember as I was 10 at the time.
I do know, though, that my folks used to take us down to Maine to vacation in August and then my mom would pack all us kids off to Sears in Bath, Maine or some other metropolis where she 'd stock up on school supplies and ToughSkins. She did that, of course, because her Canuck bucks went further back then in the U.S.
It's never been like that so long as I've been an adult. The U.S. dollar has always been worth more than the Canuck buck.
But now, the loonie is climbing back.
The best minds we have here in Canada believe we can chalk the interest in our dollar up to a few factors.
First, our central bank is raising interest rates. Just did so again this week. The U.S. central bank is a little more neutral, i.e. they're keeping things where they are. That increases the spread between U.S. and Canadian rates and that puts upward pressure on our dollar.
Second, our federal government has not run a fiscal deficit for 7 years now (!) and, in fact, the political brouhaha on this side of the border centres on the fact that our budgetary surplus is too big!
We're also running, as we almost always have, a healthy trade surplus. Meanwhile, our most important trading partner, the U.S. (and we're their most important trading partner, incidentally, not Japan or Europe), is running an absolutely monstrous fiscal deficit and an equally large trade deficit. Currency traders tend not to like trade and fiscal deficits, one reason why the Loonie, the Euro, the Swiss Franc, the Australian Dollar and just about any coin you can name is doing better these days. The reason is: The U.S. fiscal house is a mess.
(Note to my U.S. friends who might be voting next month: We've had Liberals running the books up here for the last dozen yars or so and, lo and behold, despite wasting plenty of dough on their friends and through other shenanigans, we've got a big surplus. Meanwhile, those Republicans — conservatives who are supposed to be the opposite of those crazy tax-and-spend Liberals — have racked up record debt and deficit levels. That just doesn't make any sense.)
Finally, as RBC Capital Markets economist David Wolf noted in the piece I did on this topic for CTV News [see the VIDEO LINKS section on the right hand side of the page], we are, rightly or wrongly, perceived as a commodity currency. Canada has lots of stuff. Stuff like oil and copper. The world (and China most of all) needs lots of stuff. That's pushed up commodity prices and made life for Canada's commodity producers pretty sweet.
But is a strengthening loonie a good thing?
It depends, of course, on what side of the transaction you're on. By and large, most Canadian consumers would say it's a good thing. When they travel to the U.S., they get more for their money. When their grocer imports broccoli from California this winter, it should be cheaper.
But for others — mostly exporters — it's made life kind of rough. If your a company that has most of its costs in Canada but most of your sales in the U.S., a rising loonie means you're not making the same amount of money.
And then there's the poor schmos in our TV and film industry. When the dollar was trading at 70 cents U.S., Hollywood was sending all sorts of production work up here, helping to employ thousands of actors, technicians, directors, producers, and others.
In that CTV piece I referred to, you can meet Nicholas Gray, an independent Toronto-based director and producer. He's been in the biz for 18 years but he's been without a job for 12 months thanks to our stronger loonie.