It was a see-saw day on the markets for the loonie today.
It opened at parity with the U.S. greenback Friday morning, but dropped to 99.76 cents U.S., went back above the US$1 mark, before finally closing at 99.91 cents U.S.
The drop midway through Friday was partially due to a Statistics Canada report on retail sales. They fell 0.8 per cent in July.
Despite the decline in retail sales, the loonie was able to rebound. But the strong dollar (yesterday, it reached parity with the U.S. dollar for the first time since 1976) may not necessarily be good news for every sector of the economy.
A soaring dollar may be especially hard on Canada's manufacturers who face declining sales in the U.S. as that country's purchasing power decreases when the loonie gains strength relative to the greenback.
Finance Minister Jim Flaherty said he hopes manufacturers will look on the upside of a strong dollar. He told reporters that a high dollar will make it cheaper and easier for Canadian companies to import and upgrade American technology.
He also dismissed economic analysts who fear that a recession in the manufacturing sector may be in the works if the Canadian dollar is being driven upwards by speculators. Flaherty says that Canada's overall economy is healthy.
"We have a strong commodities market and prices are good, except for (natural) gas," he said. "We have the strongest economic fundamentals in (the) G7. I leave it for the markets to take into consideration all the variables."
But Flaherty was concerned enough about the soaring dollar yesterday to meet with Bank of Canada head David Dodge. After the meeting he was tight-lipped about what was discussed. But Flaherty said he would consider helping the country's beleaguered manufacturing industry through tax incentives.
The Canadian Labour Congress says it wants action now to help manufacturers and their employees. It's calling on the Bank of Canada to drop interest rates.
That would make the loonie less attractive to investors and slow its rise against the U.S. dollar.
Pros and cons
Frank Demarinis, vice-president of Red Tag Vacations told CTV's Canada AM that with the dollar's rise there's been a 70 per cent increase in Canadians traveling to the U.S. and abroad.
And while that's good news for some travel providers, there has been a simultaneous drop in Americans coming to Canada, he says.
However, Demarinis adds that there should be a drop in the cost of domestic travel.
"You'll definitely be able to see a decrease. This year alone, right now it's five to 7 per cent on vacation packages, and you'll see that increase in the upcoming months," he said.
There are hopes that more Canadian travelling domestically could help the beleaguered tourism industry.
But tourism isn't the only industry to take a hit.
Geri Kamenz, president of the Ontario Federation of Agriculture told CTV's Canada AM the strong dollar is bad news for many farmers.
"For some farmers, they're waking up and they're rehearsing this line, it' goes something like this: 'Good morning and welcome to Tim Hortons, may I take your order please?' Because in this new reality, there's clearly going to be some farmers that just cannot compete."
Like other export-oriented industries, most of Canada's agricultural exports go to the U.S., but "that market in many commodities has just evaporated," Kamenz said.
"We're looking at the Canadian market and saying what are the opportunities within Canada? What can we do to develop the Canadian market?"
Looking even further ahead, Kamenz said, the agricultural industry wants to be ready when and if the dollar drops again.
"We're looking further down the road and saying, you know, there's a lot of analysts saying that a year from now we'll be looking at a 91 cent dollar. So what do we do in the interim between now and then, because then we will be more competitive."
