96 Cents for Your Thoughts

It's funny how things you used to take for granted can change.

Take the Canadian dollar, for example. For most of my adult life the Canadian dollar traded well below the US dollar, usually in the 80-cent range. It was less than six years ago -- in January of 2002 -- that the Canadian dollar had fallen to less than 62 cents US. The Loonie was considered such a lightweight currency that people would refer to US dollars as "real dollars" when quoting prices. Boy, have times changed.

Today, the Canadian dollar was valued at over 96 cents US. The last time it was worth so much was back in 1977, and it was on its way down in value back then. Now there is even talk of the Canadian dollar reaching parity with its US counterpart within the next two years. This would not be great for exporters or, for that matter, for companies that provide outsourcing services to American firms like my old company does. However, most people seem to think it would be a good thing.

The only thing that bothers me about this whole story is the one that people don't seem to be talking about. Changes in comparable value between currencies either occur because one currency gains value or because another one loses value. I am no economist, but I suspect that our more muscular Loonie has more to do with a weak US dollar than it does with the Canadian economy.