On Tuesday the loonie dipped below the 70-cent U.S. mark for the first time since 2003.
In a border community like Osoyoos, we will all feel the impact.
Everywhere in Canada there will be some winners and some losers. Here, businesses and consumers will feel it as much as anywhere, if not more so.
The exchange rate will be a big shock for those accustomed to driving down to Oroville or Omak to save a few dollars on their purchases.
The number of Canadians crossing the border to shop is dropping considerably – to the point that Hughes Department Store in Oroville recently announced it is closing after 82 years in business.
Osoyoos residents who travel as snowbirds to Arizona, New Mexico or California for the colder months will also be hit hard. Some are considering alternate places to escape the winter – such as Mexico – where the impact of the exchange rate isn’t quite so drastic.
At the grocery store, much of our produce, especially in the winter months, comes from places like California. Have you checked the price of a head of lettuce lately?
But there are also winners in Canada and Osoyoos.
This community relies on the tourism industry, and it will likely see a boost from the lower loonie.
Many B.C. residents who might have decided to cross the border next summer may choose a “staycation” here instead.
We already attract many Prairie snowbirds in the winter, but those numbers could well increase as ones who normally head to the southern U.S. opt for Osoyoos and Canada’s Warmest Welcome instead.
Osoyoos will also become a more popular destination for American vacationers who will suddenly find their dollar goes much further in Canada than it does at home.
Overnight travel from the U.S. rose by about seven per cent last year and is expected to increase by another 3.3 per cent this year, according to the Conference Board of Canada.
Even our local merchants may see some benefit as fewer Osoyoos residents cross the line to do their shopping.
Many Canadian businesses will also benefit as they sell their goods and services in U.S. dollars, while paying wages and other expenses in loonies.
The film industry in Vancouver should do very well, although we’re told it can be a mixed blessing for the Okanagan industry, which has trouble obtaining crews when they’re busy in Vancouver.
Manufacturers, beef exporters and mining companies that sell in U.S. dollars are among those that will benefit.
There are several reasons for the growing exchange rate difference, though the primary one is plunging oil prices.
Like it or not, Canada’s economy relies heavily on exporting oil and bitumen from the Alberta oilsands.
Oil prices have now dropped below $30 U.S. a barrel for benchmark American oil, and you can bet that Alberta oil now sells for much less.
Our dollar reflects our reliance on this commodity, a dependence that was increased under the last federal government.
Interest rates also play a role. These are set by central banks rather than by governments. The U.S. has actually increased rates, which tends to boost the value of their currency, while Bank of Canada Governor Stephen Poloz muses about moving to “negative interest rates.”
Finally, in times of perceived international instability, investors tend to seek the stability of the U.S. dollar, also boosting its value against other currencies.
In the long run, markets tend to correct themselves. In the short run, we may be in for a bumpy ride in Osoyoos and across Canada.
