How two countries fare with the US dollar. Drop in Canadian dollar has people looking to Riviera instead of Florida
Toronto — The Canadian dollar has been experiencing one of its worst weeks ever against the United States dollar. That is bad news for Canadians planning their annual trips to Hawaii, California, and Florida, but good news for Canada's export-hungry resource businesses, such as mining and lumber. On Monday, the Canadian dollar changed at 71.43 cents in American funds, and at press time Tuesday it had been slipping again on European exchange markets.
The official price for an American dollar here is $1.38. By the time bank charges are added in, that cost climbs to $1.40. And this at the time of year when many Canadians are hoping to get away from the long winter with a trip to the sun in the Southern US.
``It hasn't affected us yet, travel is up,'' reports Hilary Walsh, who owns a travel agency in Toronto. ``But that might change in a couple of months.''
Canada's tourist deficit with the US runs at about C$2 billion every year, much of that brought on by the Florida and Hawaii trade. Some Canadians have decided to switch destinations, choosing Europe over the US. That is because, although the Canadian dollar has taken a drubbing against its American counterpart, it has done well against foreign currencies. In the past year it has increased 18 percent against the British pound, 9 percent against the French franc, and 15 percent against the Swiss franc.
A year ago it cost a Canadian $1.77 to buy a British pound. Today it costs $1.50. The Canadian dollar has been bouyed by the US dollar against the other major world currencies.
But the Canadian dollar has been in a steady decline against the American dollar since 1976. Then the dollar was trading above par and a Canadian could buy an American dollar for 97 cents. The election of the separatist government in Quebec brought an air of political instability to Canada, and the currency dropped quickly. It has been in a steady decline since then. The last year has been particularly steep. In January 1984 the Canadian dollar was worth 80 cents American, and it cost a Canadian $1.25 to buy an American dollar.
Canadian Prime Minister Brian Mulroney has said keeping interest rates down is more important than defending the dollar.
The drop in the dollar helps exporters, especially those exporting minerals and lumber. These are priced in US dollars and benefit from a US dollar rise at the same time that costs in Canadian stay the same. But many of Canada's international competitors have already devalued their currencies. The Swedish kroner has been devalued sharply against the American dollar over the past three years, and Swedish pulp and lumber products are displacing Canadian goods, especially in the US.
The Mining Association of Canada has been calling for devaluation on Canada's currency, arguing that Australia, Chile, South Africa, and Brazil are beating Canada in every market from copper to gold because Canadian costs have stayed high.