As the mercury shoots upward and Canadians begin thinking about vacation, the loonie keeps dropping – sliding nearly seven cents in the past seven weeks.
That day-by-day, cent-by-cent crawl away from parity has made it a confusing time for consumers with an eye for travel, whether they’re mulling a day-long cross-border shopping trip or planning an overnight stay in the United States.
Will the loonie swing back up and make that New York City shopping trip worthwhile or continue its downward fall brought on by the shaky European economy?
Either way, the drop is not what economists predicted, nor what vacationers expected.
Toronto newlyweds Jeffrey and Rebecca Preszler noticed a difference in the value of their Canadian dollar when they got married in Las Vegas on the weekend. They had been there since last Tuesday, but had bought their U.S. currency ahead of time at near-parity rates, Mr. Preszler said.
They particularly noted the dip in the value of their dollar after Mr. Preszler used his credit cards because his traveler’s cheques were turned down at a club they visited after their Saturday wedding.
“When [we] used our credit card, it ended up being a $600 difference,” he said. “I know that the dollar does fluctuate, but there was a significant swing. I don’t know what the dollar was at when the charge went through, but [it] is probably close to an 8-per-cent swing.”
The Preszlers and other Canadians can blame Greece and its debt problems for the sudden slide in their dollar.Rahim Madhavji, president of Knightsbridge Foreign Exchange, said that financial markets are worried Greece will default on the money it owes to European banks. Compounding these fears is the risk that Portugal and Spain will also default, causing bank failures reminiscent of the collapse of Lehman Brothers in the United States in 2008.
This kind of uncertainty inevitably causes money to flow into the U.S. dollar, considered the Fort Knox of currencies. “It’s a herd mentality – everyone wants U.S. dollars, and so the U.S. dollar appreciates,” Mr. Madhavji said.
