Loonie is Strong:  September Exchange Rates Released

The Canadian Loonie had a strong showing last month, chalking up impressive present values, which helped travelers especially to the US and Europe with their exchange rates. The value of the Canadian dollar vs other currencies was as follows:

Month	US Dollar	Euro	Mexican Peso	UK Pound
September	1.033	1.3535	0.08073	1.61044286
July	1.04268571	1.3358	0.08139	1.59522857
Average 2009	1.14197729	1.5855	0.08448	1.7835578

Why is watching the fluctuations of the loonie important to the Canadian economy, and more specifically those who work, spend and save in it? According to the Bank of Canada

"Specifically, a rise or fall in the external value of the Canadian dollar will make Canadian goods and services less or more expensive for foreign buyers, and this will tend to boost or hold back their demand for our products. Movements up or down in the Canadian dollar relative to other currencies will also make imported goods more or less affordable, thus increasing or reducing the volume of our imports.î

So while travelers rejoice, the strong loonie can hurt manufacturers, exporters and those who work in those industries affected by foreign buyers. Apparently there is not much we can do to control the value of our currency. The Bank's research shows that . . .î the evolution of commodity prices is the main driver of the Canadian dollar over time. Commodity prices, however, are essentially shaped by global forces that are beyond Canada's control.î

Lots of other factors also influence the value of our currency:

• the world prices for commodities.
• Our relative economic performance.
• relative inflation rates
• relative interest rates
• Canada's productivity record
• trade and current account balances
• the size of Canada's public debt relative to that of the United States, as well as Canadian tax policies and incentives.
• short-term capital flows
• domestic political turmoil

For more information, a good background article on exchange rates appears here: http://www.bankofcanada.ca/en/backgrounders/bg-e1.html

• Elements of Real Wealth Management
• Financial Literacy: Evaluating Risk and Return
• Tax Efficient Investment Income Planning