Canadian Dollar

Loonie at $1.02 yesterday. Who cares and why should we? What effect on Investment planning if any?

Well I care. The Canadian dollar tends to move in the same direction as the stock market because the US dollar tends to be negatively correlated or moves in an inverse direction to the stock markets. For example today the markets are down and so is the loonie. In terms of investment planning, if the loonie continues to rise, it's a double edged sword. It's great for importers and snowbirds and for exporters it drags on their profit because of the increased prices of their wares or goods they are selling abroad. Especially if it rises quickly because business owners can't prepare for it. We are very relient on the world economy and so in the long run it will hamper growth in Canada and therefore potentially reduce your return expectations unless you adjust for it.

Next Wednesday January 19th the local CFA society is hosting their annual forecast dinner. One of the topics they will forecast on is the Canadian dollar. If you would like to attend give me a call and I can get you a ticket.