Well being a Canadian who has earned US pay cheques for many years I had my first moment of disbelieve. I usually deposit to a Canadian bank US funds account. As I need money I simply go online and transfer funds from my US account to my Canadian account. For the first time ever a transfer of US funds to Canadian was LESS than par (the banks offer slightly less than going rate to make their money, of course). Unbelievable! I hope the rate fluctuates enough (down with C$ up with US$) so I can try and exchange what I have and not umm.. lose money. Here are the results:
Amount : 100.00 USD
Conversion Rate: 0.9911
Converted Amount: 99.11 CAD
Like many Canadian self-employed writers who do work for US-based publications, I feel it. Frequently, in the past, I would accept lower than ‘average’ rates in US dollars, knowing that after the conversion it would actually be 20-30% (or more) higher, making the job worth the pay. There was no problem with, lets say $100 US for ‘insert job here’ rate when you knew you’d get $125 or more for the job. Over the past year where it averaged $110CDN on $100USD, I’ve frequently wondered about this and watched my income decline since the Loonie gained. Its definitely not worth holding US funds any more, not for the time being. Forecasts say the two dollars will be on par early next year, however once you add in banking exchange for actual transactions (especially on cheques rather than physical US money) it will be even less as the dollars reach par.
Ah. darn it.
For those interested in the bigger, global impact, here are two articles published by Canadian News sources:
Globe and mail: Eric Lascelles parses the Fed
There are two ways to interpret the implications of this move for the Canadian economy. On the one hand, it suggests that the Fed is concerned about the prospects for the U.S. economy, and thus that we should be on watch for a related dampening of Canadian exports. But insofar as the entire purpose of Fed rate cuts is to stimulate U.S. demand, this could bode well for the Canadian economy. Net net, I’m not sure the Canadian economy will be overly influenced either way by this move.
CTV: U.S. interest rate cut lifts loonie to record high
U.S. has been dealing with the partial collapse of their housing market plus a worsening credit crunch. In the meantime, Canada has benefited from record-setting crude oil prices and strong demand for metals, coal, chemicals, grain and other farm products.