Many Canadian Firms Learning to Cope with Strong Dollar: Think Tank Report

(The Canadian Press – Julian Beltrame)

With the loonie once again nearing parity with the U.S. dollar, a new report on the currency is giving hope it may not be the menace to the economy many believe it to be. The Conference Board weighed in on the subject Monday with a surprising argument – a strong loonie and currency volatility are a net negative for the economy, but not a major impediment, particularly if firms take steps to adapt.

More surprisingly, the think tank said currency fluctuations impact the service sector more than the manufacturing, mining and oil and gas industries, because the latter have found ways to hedge against rapid changes.

The more global and integrated a company is, the more it can ride out the ups and downs of Canada’s relatively volatile currency, the Conference Board said.

“The manufacturing sector was largely able to shrug off the impact of currency volatility prior to the recession,” the report points out. “Most manufacturing industries managed well, as they are integrated into global supply chains, importing inputs into the production process, investing in imported machinery and equipment, and investing in plants abroad.” Read more here.