For the first time in about two years, and a rare event in a generation, the Canadian dollar is worth the same as a US dollar. The following is a three-year chart of the Canadian Dollar vs. the US Dollar:
This can probably be explained by a few factors:
1. Rate differentials: The Bank of Canada is expected to have a higher interest rate than the US Federal Reserve, thus moving carry trade dollars into the Canadian currency;
2. Commodities: Canada is seen internationally as being concentrated with commodity markets. Thus, more demand for Canadian dollars due to high exports of more expensive commodities;
3. Fiscal factors: The Canadian government is less of a fiscal basket case than the US government, thus inspiring confidence in Canadian bonds, thus giving the currency higher value.
The question is whether this trend will continue or whether there will be some sort of regression of the mean (the Canadian dollar traditionally has been around 80 cents US throughout its lifetime). I truly don’t know.
With a strengthened dollar, consumers win because their dollars have higher purchasing power. Prices in Canada are always higher than in the United States, so a cross-border shopping trip will probably have more value realized.
Also, investors should probably take a look at currency concentration and perhaps consider diversifying into US equities if they are primarily concentrated in Canadian currency.