Declining dollar poses challenges

The uncertainty surrounding Canada’s dollar is likely to continue, with some forecasters even predicting a dollar worth 60 cents U.S.

Canadians thinking of heading south for a holiday this winter could be forgiven for cringing every time they pick up a newspaper or turn on the television news.

The dropping Canadian dollar has been dominating the news for the first few weeks of the year, reaching its lowest point in 12 years and currently hovering just above 70 cents U.S.

For those planning on travelling outside of the country, this represents a major financial hit. The Euro and the American dollar are both considerably higher, which means we don’t get much for our money overseas, or south of the border.

Here at home, the reaction to the plunging dollar has been a little more mixed. The major factor influencing the falling Canadian dollar is the price of oil. With the price of oil now sitting at around $32 a barrel, the price at the pump has dropped below $1 a litre for Victoria drivers. (With the price of oil now only about one-quarter of the cost from just two years ago, you could make the argument that gasoline prices should be even cheaper, but that’s a topic for another day.)

But the money saved on the fill-up of the family vehicle won’t cover the increases seen at the grocery check-out. With California in the midst of a prolonged drought, consumers have been warned for years that the cost of fruits and vegetables were bound to skyrocket. Those skyrocketing prices have now become a reality, with shoppers facing $7 prices for a head of cauliflower.

Of course, the high cost of imported fruits and vegetables comes as good news for local farmers who have been struggling to get by. The lower dollar also means Canadian manufactured goods are move competitive and provides incentives to those considering a Canadian holiday.

However, the uncertainty surrounding Canada’s dollar is likely to continue, with some forecasters even predicting a dollar worth 60 cents U.S. So whether you’re heading out of the country or not, you’d be well advised to buckle up – it looks like we could be in for a bumpy ride.

 

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