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  Weekly Feature (November 11, 2007)
 


 
Strong Canadian DollarImplications of a Strong Canadian Dollar
by L

 

The dollar, closing at 1.08 U.S. this week, represents an appreciation of 10% in the last month and around 50% over the past couple of years. Against other currencies, it has done almost as well. On average, it has risen around 30 percent. How has this affected you personally?

If you are a shopper, itís been wonderful. The prices of imported goods should fall by an equivalent amount. Your Canadian dollar can buy 30% more than it could a year ago. If you are working here and sending money overseas, you can get a lot more foreign currency per loonie than before.

Hereís the downside: if you are receiving money from abroad, it takes a lot more foreign currency to buy the same amount of Canadian dollars. If you are a new immigrant who has just sold your property overseas with the hope of buying a home in Vancouver, you will be facing a double jeopardy: fewer Canadian dollars to buy very costly property here. Generally, buying a house in Vancouver now will have cost you at least double in most foreign currencies what it would have cost you two years ago.

The other problem is that prices are not coming down fast enough. For example, while I was trying to get more information on the internet about a chair I saw in a local flyer, I accidentally got into the storeís U.S. website. It was frustrating to see that same chair advertised for almost half the price.

To get the same 8 chairs locally would cost roughly $500 more. An identical dishwasher I was shopping for cost $500 less down south than here. In other words, I could take a short two hour trip down to Bellingham and save myself a thousand bucks if I were to buy my chairs and dishwasher in the U.S.

I am reluctant to shop in the U.S. because I feel I should support the local Canadian businesses. Besides which, the U.S. immigration and customs folks are a pain to deal with. The long waits at the border are another big discouragement.

So, what is a shopper to do? You get to make your own decisions. I am going to wait one more month to see if local prices are adjusted to reflect the rise in the Canadian dollar. Canadian retailers say that our costs here are higher than the U.S. I can understand a price difference of 10%, and would be willing to pay that much more. A 50% difference means that they are either trying to clear off their old stock bought at higher prices, or that they are hoping to make extra profits.

In either case, their lack of responsiveness makes it difficult for customers to continue paying the unjustifiably high prices. The next time, I visit my local store, I might just mention that their U.S. counterparts in the same chain are selling the item I want for half the price. Maybe that will help encourage them to take the prices down a little bit quicker.

 

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