The loonie and the U.S. dollar have been hovering around par for nearly the past five years¹, which means many Canadians didn’t give much thought to exchange rates when travelling south of the border or purchasing U.S. goods. Now? Not so much.

Here’s how a lower loonie is likely to affect your wallet.

Imported goods will cost more
Canada imports a lot of goods from the U.S., from clothes to technology to cars. Prices for most, if not all, of these things have gone up since the dollar began its slide. If you order products from U.S. websites, like the Apple store, you might notice the difference even more.

But most Canadians are really feeling the pinch when it comes to their grocery bills. Many of the fruits and vegetables we buy at the grocery store are imported from the U.S., and prices have been steadily on the rise. Keep in mind that restaurants aren’t immune to higher food prices, so you may pay more when you eat out, too.

Just how big has the impact been? The University of Guelph’s Food Institute says Canadians spent about $325 more on food in 2015 compared to 2014, and can expect to spend about $345 more in 2016². On the positive side, lower energy prices mean you’re saving money at the pumps and, potentially, on your home heating bill – so you can put that money toward your grocery purchases.

Your trip south will be less affordable
Travelling to the U.S. right now is a lot more costly for Canadians than it has been for several years. Once you’ve exchanged your Canadian dollars for U.S. dollars, you’ll find that your money doesn’t stretch nearly as far as you’d like it to.

On the other hand, the Canadian tourism industry is benefiting from an influx in U.S. travellers. That might make Canadian destinations a bit more crowded than usual, but this is a good time to find ways to have fun closer to home.

Your investments could benefit
Any U.S. investments you currently hold may be worth more, because they are priced in USD. As such, they are ‘worth more’ when their values are converted back to CAD. As such, your portfolio will get a bit of a boost once those returns are converted into Canadian dollars. This doesn’t apply if you are invested in mutual funds that hedge their foreign currency exposures back to the Canadian dollar, meaning that currency fluctuations won’t impact performance of the mutual fund.

However, now may not be the time to add new U.S. investments to your portfolio. You’ll be buying these new holdings in Canadian dollars, which will have to be converted into U.S. dollars to make the purchase and will buy you a lot less than you might expect.

Call us today to talk about how the weaker Canadian dollar is affecting your portfolio and if now is the right time to invest more.

Sources:
¹ Monthly Average Exchange Rates: 10-Year Lookup
² Food Price Report 2016