The trend in US Canadian is going to continue. Soon it will be .80 U.S. to 1 Canadian, I guarantee it.
It will likely continue, but going that low would actually be very bad news for Canadians because a great deal of their economic activity thrives when the USD is stronger (oil sands, timber-related products, auto manufacturing). For example, many of the large Canadian companies posted really poor results in 2007 and the first half of 2008, specifically for this reason alone. A revisitation of a 1:1 ratio so quickly could be enough to sink many of those companies.
So, a 0.8 exchange rate might be good for Canadians’ purchasing power, it may be very costly economically. Not to mention that it could have very negative implications for all of the infrastructure projects that the provinces have planned over the next few years since most of the debt-funding for these projects is expected to come from non-Canadian banks.
The manufacturing sector represents 14% of Canada’s GDP, I know it’s a sizable chunk but I feel that the media tends to over hype of the ill effects of a strong Canadian dollar. It really all depends on what economic perspective you want to take. Personally I feel like Canadians import far more than we export, which means we are exporting a lot of our wealth to other nations (wealth that is mainly derived from natural resources). Slashes in commodity prices are far worse for Canadians than an increase in the strength of our dollar.
Plus, with free trade and globalization Canadians should be looking to invest in something other than manufacturing which will likely be outsourced soon enough anyway. [/quote]
Fortunately or unfortunately, what any one of us thinks doesn’t change the fact that Canada exports more than it imports and the U.S. purchases approximately 80% of the Canadian export goods. A strengthening CAD (vis-a-vis the USD) means that Canadian products are becoming less affordable for Americans and therefore, less attractive. It’s basic macro-economics.
Agriculture and Industry account for nearly 1/3rd of Canadian GDP. These industries tend to be susceptible to wide swings in currencies. How much of that market can you afford to lose before it takes a toll on your economy? If I knew the answer, I wouldn’t need to work for a living.