The Canadian dollar vis-a-vis the US dollar has lost some ground of recent. Well, quite a bit actually.
The first sentiment of a high dollar is national pride. We are better than them. A falling dollar, signs of weakness. Not good. But, how much impact does it have on you?
Holidays and shopping trips south of the border just became more expensive. Ditto for internet shopping for items priced in US dollars. Imported items will cost more and grocery shoppers should notice this especially in the produce section. Manufacturers that buy equipment south of the border feel it big time.
A few smart consumers and more sophisticated companies either bought US dollars some time back or hedged some of their bets. Even vacation packagers using these strategies seem to have been caught off guard at the rapid change and some have already passed this along to consumers.
On the positive, a stalling resource economy looks a little more attractive to the outside world. This should translate to a pick-up in jobs. Tourism is another beneficiary as Americans find Canada is selling at a discount this year and our own residents might forgo a trip south in favour of a staycation. Even investors and pension funds, who increased their exposure to global markets based in the US, have benefitted from both the rapid rise in US-based indices and also dollar adjusted returns.
Why the sudden plunge? Markets are fickle. They partly reflect true value but short-term sentiment plays a role. Maybe the Canadian dollar was too high relative to the US dollar. Maybe the US dollar was too low relative to the Canadian.
It's also a commentary on unsustainable household debt. The record low interest rates implemented to re-boot the Canadian economy following the global financial crisis have done their job. Perhaps, too well. Household debt is at record highs while good paying jobs continue to disappear nationally. The fear from those pulling their money out of Canada is that the spending spree is overdue for a time out. The rationale is less spending, less jobs, less profits and thus, better opportunities elsewhere.
Those international investors tend to come and go quite a bit. I anticipate they will be back. They always have in the past.
For the average person I wouldn't place too much emphasis on short term predictions. You either positioned yourself for this likelihood or you didn't. No point chasing ships that have left port.