Sinking loonie good for exports, bad for snowbirds

The price of a trip to the sunny south is going up as more tour operators add a so-called ‘currency surcharge” to offset the sharp decline in the value of the loonie against the US dollar.

Transat AT spokeswoman Debbie Cabana confirmed Thursday that Canada’s largest tour operator is adding a $35 currency surcharge to sun destinations and Florida

Senior Scotia-McLeod wealth advisor Andrew Pyle noted the Bank of Canada’s statements centring on weak inflation, but said he’s not worried about that in the long term, as the strength of the Canadian dollar over the last few years has led to lower prices here.

Loonie at 4-year low

The sinking loonie will head even lower by this summer, one of Canada’s largest banks predicted.

The Canadian dollar is trading at its lowest level in two years a development that’s considered good news for export manufacturers  in Canada but bad news for those relying on purchases from the United States.

loonie

TD Bank economists Craig Alexander and Leslie Preston said  they expect the Canadian dollar to sink as low as 85 cents against the US dollar later this year, before rebounding slightly to back near the 90-cent level sometime in 2015.

The loonie flip-flopped Jan. 30, settling around the 89.63 level. 

The loonie has lost almost five cents since the start of the year, caught up in a global trend that’s seeing the U.S. dollar gain in value against almost every other currency.

Weak economic data and slumping commodity prices have also contributed to the loonie’s decline.

Bank welcomes weakening dollar

The bank is welcoming the weakening Canadian dollar partly because reduces the pressure to trim interest rates since the lower currency will begin to pump some life into inflation, according to Bank of Montreal (BMO) economist, Doug Porter.

Canadian retailers, who have been losing business to internet and cross-border shoppers, may do better if the lower loonie means consumers spend their money closer to home. That’s provided that their suppliers don’t want to be paid in the US greenback.

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