Canadians are expressing pride in their economy but might be more inclined to go on shopping sprees in the U.S. after the Canadian dollar reached parity with the U.S. dollar for the first time since 1976.
Thanks to a sinking U.S. dollar and soaring commodities prices that benefit oil-rich Canada, the "loonie" — named for the Canadian bird depicted on the one-dollar coin — could be exchanged 1-for-1 with the greenback Thursday.
"It makes me feel very proud. It's a signal that our economy is doing well," said Toronto freelance writer Ayah McKhail. "Everywhere you go in the world, the American dollar is just seen as the strongest one (currency).
So to feel that, as a Canadian, our dollar is finally there, it's very exciting." The U.S. currency also plummeted to a new low Thursday against the 13-nation euro, which traded above $1.40 for the first time since it was introduced in 1999.
What's good for Canadian consumers and U.S. exporters, however, isn't such a boon to U.S. shoppers, who will find it more expensive to travel to Canada and to buy goods from the nation's largest trading partner.
That's a condition being repeated all around the globe as the dollar tumbles against a slew of currencies, including the euro, the pound and even the Indian rupee. Its decline means Americans will pay more for imports and trips to Paris, Rome, Bangalore and Toronto. It also may drive overseas demand for U.S. goods and help raise profits at U.S. multinational corporations.
A lower U.S. dollar diminishes the spending power of American tourists while attracting foreign visitors who seek cheaper accommodations and shopping. Canadians will be making more cross-border shopping trips to the U.S. to buy clothes, shoes and electronic gear. Most goods in Canada haven't been reduced yet to reflect the rising Canadian dollar. "It's going to take some time before it trickles down to us," said Linda An, a Toronto shopper. "Shopping, especially for big ticket items, is great
now in the U.S." Daina Jefferies planned to take advantage of weaker American dollar Thursday, exiting Macy's at the Walden Galleria Mall in the Buffalo, N.Y., suburb of Cheektowaga, about 10 miles from the Canadian border. "I just bought the same things I bought last week in Toronto for half the price," she said, adding a couple of bags to a collection already in the back of her car. "I'm going to go home and return them. I knew I was coming so I thought I wouldn't take the tags off. Now there's no way I'm keeping it because it's twice as expensive."
Krys Esteves of Caledon, near Toronto, headed into the mall with her mother, Maria Swica of Mississauga, Ontario. "My son wants a soft-serve ice cream maker for Christmas so I'm looking for that," Esteves said. "It's just to compare. Right now, I know it's definitely to our advantage." The Canadian dollar hovered near parity in late New York trading Thursday, buying 99.93 U.S. cents.
Canada's currency rose sharply against the U.S. dollar after the Federal Reserve on Tuesday announced a dramatic half-point cut in its benchmark interest rates. While aimed at shoring up U.S. credit markets, the cut further weakened the dollar against other currencies by reducing returns on dollar-denominated investments.
Even before the rate cut, the Canadian dollar experienced a summer of record highs. Canada, a major oil exporter, has benefited from soaring crude prices and a strong economy. Oil prices surged into record territory Thursday as the weakening U.S. dollar fueled buying by making futures cheaper for foreign investors.
"The Canadian economy that once used to be the sleepy little resource backwater of the North American economy is certainly turning the tables on its big brother in a hurry," said Jeff Rubin, chief economist and strategist at CIBC World Markets.
The United States, meanwhile, has suffered a collapse of much of its housing market and a worsening credit crunch, prompting the Fed's dramatic action this week. The central bank is far less concerned about the value of the nation's currency, however, said Michael Woolfolk, senior currency strategist at the Bank of New York.
"There's a conspicuous silence coming from the Fed with respect to the value of the dollar," he said. The U.S. currency plummeted to a new low Thursday against the 13-nation euro, which traded above $1.40 for the first time since it was introduced in 1999. The euro rose as high as $1.4098 Thursday before falling back to $1.4076, up from $1.3964 late Wednesday. The $1.40 level has long been viewed as a key benchmark in terms of driving the euro toward becoming a reserve currency of choice — a position long held by the now-weakening dollar.
The dollar was down across the board Thursday, dropping to a nine-year low against the Indian rupee amid strong demand from foreign funds investing in India's booming economy. The rupee rose to 39.92 per dollar in intraday trading, breaching the 40 rupees-per-dollar mark for the first time since May 1998. The dollar also dipped against the British pound, falling to $2.0099 from $2.0025 late Wednesday, after U.K. retail sales in August rose by 0.6 percent from July. The U.S. currency fell against the Japanese yen to 114.44 from 116.09 late Wednesday. "The U.S isn't so mighty anymore," said Brian Lee of Toronto