The Canadian dollar is expected to spiral lower throughout 2014, after a 3.1% slide in the first two weeks of the year that has taken it to its lowest levels since 2009.
On Wednesday, the loonie was down 0.07 to 91.27 U.S. in the morning before recovering to 91.37 at the close of trading.
The stronger U.S. economy is putting pressure on the Canadian currency, with earnings from bellwether stock Bank of America rising and U.S. job numbers in recovery.
A report from the World Bank showing a recovering global economy also reflects badly on Canada. The loonie has been in decline for six months against the currencies of other developed nations.
Recent Canadian economic data has disappointed markets, particularly reports last week showing a rising trade deficit and December employment data showing the loss of 46,000 jobs.
Many currency traders have been waiting for the U.S. dollar to spring back, based on its economic trends, before moving out of other currencies such as the loonie, which until recently promised greater stability. For many, the U.S. Federal Reserve decision to taper its bond-buying program was the signal they were looking for.
For Canadian travelers, the impact of a lower dollar hits harder and almost immediately. Travel to warmer areas that is popular the first three months of the year has already risen in price — for U.S. destinations as well as other countries where hotels are priced in U.S. dollars or currencies are pegged to the greenback.
For Canadians, shopping for fruits and vegetables flowing in from the U.S. and other retail goods made in the U.S. could also become more expensive. However, there is intense competition in both the retail and grocery sectors in Canada, with U.S.-based retailers including Wal-Mart and Target entering the market, and that could moderate the price increases.
The flip side is that the more expensive U.S. dollar will make cross-border shopping costlier, leaving Canadians calculating the conversion rate when they see a lower price in a U.S. shop.
The tourism sector in Canada is likely to reap some rewards, however, as travel to Canada becomes more affordable for Americans with their stronger dollar. Canadian music and theatre festivals, such as Ontario's Stratford Festival, as well as ski resorts and summer resorts stand to benefit.
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