Loonie reaches parity for first time since 2008, but dips to 99.88 cents U.S.

OTTAWA — With the Canadian dollar riding oil prices to parity with the U.S. dollar, many Ottawa consumers and businesses were looking to cash in Tuesday.

Mohinder Singh, a technology executive at RBR Ltd., was waiting in line at a currency exchange centre, seeking money for a business trip.

But he’s also looking at the longer period.

“The lower U.S. dollar is beneficial in the long term. Some of the tools that I buy to make our products are very expensive. We are in a very competitive business and the change in the dollar will help.”

The parking lot outside the Accu-Rate Corp. exchange office on Carling Avenue was full as Singh and others waited patiently in lengthy lineups.

Marie Boivin, managing director at Accu-Rate, said the rise of the Canadian dollar is increasing business by up to 30 per cent compared to a year earlier.

“The phone is ringing off the hook,” she said. “We are getting more than 50-per-cent more inquiries from companies than we were getting at the end of December.”

The Canadian dollar reached parity against its American cousin early in the day Tuesday, but closed at 99.88 cents U.S. The last time it was at parity was in July 2008.

Most of the people purchasing U.S. currency Tuesday at the Carling Avenue shop were planning shopping trips or vacations. “We are going to Mexico and this will make it that much better,” said one woman who did not want to give her name.

Another customer, Noy Phaengbouavanh, said: “The rate is much better than it was before. I am going to save the money for a trip home to Laos.”

However, the richer dollar makes Ottawa less attractive to U.S. tourists. Americans generate about eight per cent of all traffic, down from 12 per cent in the late 1990s.

Jantine Van Kregten of the Ottawa Tourism Bureau said the industry was countering that issue by focusing on unique Ottawa attractions, direct flights to Europe and appealing to a higher-end clientele. It hopes to make up a decline of three per cent in business now that the recession is easing.

Richard Whetstone, a senior commercial account manager at the Bank of Montreal, said that, with many consumers attracted to U.S. shopping centres close to the border, some are getting U.S.-denominated credit cards to avoid service fees.

He said the rising dollar is forcing many businesses with global exposure to look harder for improved efficiencies. “The higher dollar means they can invest in technology (from outside Canada) that will yield long-term competitive advantage.”

Accu-Rate’s Boivin has noticed a change in why people want U.S. currency.

“Just before Easter, we got many people buying U.S. dollars for a shopping trip. Now many want to take advantage of the weak U.S. housing market. They are buying properties priced below $100,000 that were going for twice as much … in the past.”

She also noted businesses are seeking advice on how to hedge their currency exposure because the movement has been so dramatic. “They want to find ways to protect themselves as well as take advantage of swings in the currency.”

Many technology companies have used a variety of hedging strategies to limit their exposure because most of their business is in U.S. dollars.

Some, like Zarlink Semiconductor, have switched to reporting in U.S. dollars to ease the swings.

While others, like Mosaid Technologies, still report in Canadian dollars, but buy advance contracts of up to a year to take some bounce out of the shifts in currency.

It noted in its recent quarterly results that a one-cent movement in the U.S. dollar could impact results as much as $206,000.

Mosaid spokesman Michael Salter said that swings in foreign exchange are part of the business of running a public technology company.

“We have a very active foreign exchange risk-management program because no one can predict what will happen in the future.”

Companies that registered big foreign-exchange gains a year ago when the Canadian dollar was low are now reporting significant charges as the dollar rises.

Over time, the rise of the dollar has hurt employment in industries like technology, where exported products become more expensive. Recently, companies have been hiring product developers in India and China to do work previously done in North America.

Leslie Klein, chief executive of C-Com Satellite, said: “We could play at hedging strategies, but I am not happy with gambling situations. I think there are too many risks and the results could go either way.”

His company, which sells mobile satellite antenna gear to resource industries and public safety agencies around the world, benefited from a weak Canadian dollar a year ago, but is now feeling the squeeze on results with a strong dollar.

“We are on a roller-coaster and we just have to ride with it.”

by The Ottawa Citizen

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