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Published: Wednesday, 5/10/2006

Canadian currency flexes its muscle

BY MARY-BETH McLAUGHLIN
BLADE BUSINESS WRITER
The Ambassador Bridge, south of Detroit, is a major link for commerce between the United States and Canada. The Ambassador Bridge, south of Detroit, is a major link for commerce between the United States and Canada.
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Travelers planning a trip to Canada this year - whether to the casinos in Windsor, the annual drama festival in Stratford, or the majestic Niagara Falls - might want to bring more money.

U.S. businesses shipping goods or providing services to Canada - farmers exporting their crops, manufacturers shipping auto parts, or consultants offering services - might want to start counting their extra cash.

After hitting a low of 62 cents in 2002, the Canadian dollar, often called the loonie because the country's $1 coin features a loon, is now valued at more than 90 cents to the U.S. dollar, the first time in nearly 30 years it has been this strong.

The northern currency rose above 91 U.S. cents yesterday for the first time since 1978. The currency was last at parity with the United States dollar in 1976.

"Every time the Canadian dollar gets stronger, it's more expensive for Americans who travel to Canada," said Mark Kasoff, a professor of economics and the director of the Canadian Studies Center at Bowling Green State University.

"For Ohio firms, on the other hand, it will be relatively cheaper to sell in Canada."

Whether the change in currency value curtails trips to Canada depends on tourists' mindset, said Kathy Tobis, who owns TLC Charters & Tours in Toledo. It conducts a monthly tour to Niagara Falls, which straddles Canada and the United States. "They basically go for the attraction of the falls, so they're still going to go," she said.

Laurie Ghesquiere, a spokesman for AAA in Northwest Ohio, has booked 32 travelers from here for an 11-day trip by rail through the Canadian Rockies, departing July 6.

"The way we're looking at is the money is not affecting it," she said.

The average cost of the trip is $3,500, with 17 meals included, but because travelers have been booking since January, any increased costs because of the strengthening Canadian dollar will be absorbed by the agency.

The impact may not be as noticeable as quickly for companies importing products from Canada, said Bob Tull, managing director of corporate and institutional services for Fifth Third Bancorp.

"When you start talking about currency movements, you have to equate it to a snake eating a rat," he said. "It takes awhile for the rat to get through the system. The retailers and the wholesalers haven't digested it yet."

Experts say the strengthening Canadian dollar - or the weakened U.S. dollar - is the result of Canada's having a surplus in both its trade and budget, being a producer of raw materials at a time the world is clamoring for them, and having high interest rates that attract investment in the Canadian dollar.

The issue of how strong the loonie is compared to the U.S. dollar becomes larger depending on the corporation involved, and how much an area exports to the country to the north, said Fifth Third's Mr. Tull.

For example, Ohio's shipments to Canada last year were $17 billion, or half of the state's total exports. By comparison, U.S. exports to the north were 23 percent of the national total.

"Goods that are getting exported out of Canada into the U.S. that firms here are purchasing are effectively going to be more expensive," said Mr. Tull.

The strong Canadian dollar could mean opportunity, however, for companies and others that are situated in Ohio and Michigan but have done or want to do business with companies across the border, said Joseph Loeffler, a trade specialist with the International Trade Assistance Center in Toledo.

"I really think this is going to be a net benefit for the United States," he said.

Contact Mary-Beth McLaughlin at

mmclaughlin@theblade.com

or 419-724-6199.



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