The value of the loonie continues to plunge alongside dropping oil prices
By Leah Ching, Staff Writer
The loonie dropped to a startling low last week, sitting at 0.69 cents per USD. With Canadian dollar not having dipped so far since 2003, experts are predicting that the worst is yet to come. Macquarie Group Ltd’s David Doyle, Bloomberg’s top-ranked forecaster for the Canadian dollar has said that the loonie would continue to plummet in 2016, possibly leaving Canadians with a 59 cent loonie, giving the U.S. dollar the ability to purchase $1.69 CAD. Doyle predicted that Canada’s currency would continue to stay depressed through the end of 2018, with effects far reaching throughout the country.
For many Canadians, a glimmer of hope appeared early last Friday, when the Canadian dollar starting a slow upward trend for two days at the end of last week, sitting at 70.77 cents US. Oil prices started to slowly rise as well, with crude oil trading at $31.61 U.S. per barrel, after dipping below $28 per barrel on Wednesday for the first time in 12 years. The Canadian dollar’s woes can be attributed to the result of the low world oil prices as well as factors such as weak global economic growth and the gap between Canadian and American interest rates. Even as the price of oil drops steadily, oil producers have began to flood the market and create a global production surplus, sending oil prices down even lower.
Even with incremental improvements to the Canadian dollar, the reality remains that the consumer will have to deal with the negative effects of Canada’s weak loonie for some time to come.
On a consumer level, the weakness of a currency makes foreign travel more expensive. So for many Thunder Bay locals, this may mean skipping the road trip to Duluth or Minneapolis in favor of flying to Toronto for a weekend.
For students it may pose a serious problem, especially when buying food. Grocery bills have climbed by 4.1% since the loonie started sinking according to Stats Canada. For many people this may be the time to start looking for local produce as imported goods have spiked drastically, with the price of cauliflower surging to $7 a head and cucumbers at $3 per unit in some Ontario groceries.
For Canadian businesses, currency depreciation has already sent the price of machinery and equipment, 73% of which is imported, to a new record high. This is bound to complicate many infrastructure and development projects, including Canada’s transition to a less energy-intensive economy.
While a low laying currency creates some hurdles for Canadian consumers, the weak dollar may not be all bad. The dip could mean an increased amount tourism into Canada, alongside increased exports which have the opportunity to boost foreign demand while keeping consumer demand domestic.