CAD near parity with USD again

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The Canadian dollar (CAD) has not reached parity with the U.S. dollar (USD) since April of this year, until this past week. It didn’t close at par with it but reached it in intraday trading. Now analysts are saying that they think this is not just a short lived trend. They feel that for the next several months and up to a year or more, the CAD will be at around par with the USD.

When this happened in late 2007 and for a good part of 2008, businesses in Canada had to change their strategies and even their business models in some cases. Some companies, particularly exporting businesses were not able to handle this currency arrangement and went out of business. For years, Canadian exporting firms relied on a weaker dollar which gave them an advantage when selling to the U.S. Some companies even relied on only the exchange rate for their profits (never a good idea). However, now that the CAD has gained strength once again businesses are likely better prepared for it.

The CAD didn’t drop too much over the last two years since it first reached (and surpassed, briefly) the parity mark with the USD. This meant that Canadian companies (and American ones, too) did not have the chance to revert back to their old ways of doing business when the CAD was $0.65. Therefore, now that the CAD is gaining some strength vs. the USD, these businesses are likely going to be able to weather it better. This doesn’t mean that it’s a good thing for the long-term, but most companies should be ok for a while.

There are differing opinions on this issue as some think Canada is better off with a strong dollar, while others prefer a weaker one. I believe that having a Canadian dollar at around $0.67-$0.75 compared to the USD is optimal for long-term success of the Canadian economy and businesses. Hopefully, this CAD surge will be relatively short lived and will come back down soon.