Winnipeg Free Press - PRINT EDITION
Strong loonie not so bad, Conference Board argues
OTTAWA -- 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 is.
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 affect 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 says.
"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."
In other words, said Louis Theriault, who authored the report, companies that are "internationalized" gain from a high currency in one aspect of their operations, while losing in another.
-- The Canadian Press
Republished from the Winnipeg Free Press print edition March 16, 2010 B6
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