The Canadian dollar is making a bit of a comeback, but it may be short-lived.
The loonie climbed to 80 cents compared to the U.S. dollar on Monday morning, then hovered around that mark when the markets closed. It’s the first time the loonie reached 80 cents since June 2015, according to data from Google Finance.
The rally has been strong in recent weeks; in early June the Canadian dollar was just under 74 cents compared to the U.S. dollar.
One reason for the rise includes stronger-than-expected growth in the Canadian economy paired with slower-than-expected U.S. economic growth, said Steven Globerman, an international business professor at Western Washington University.
The Bank of Canada raised borrowing costs this month for the first time in seven years, an indication Canada’s economy is in growth mode, according to a Bloomberg article.
What happens with the Canadian dollar plays a factor in cross-border shopping, influencing sales for retailers in Whatcom County and lower British Columbia. The loonie would probably need to be in the 80-cent range for weeks or months before it leads to much of an increase in cross-border traffic.
According to data collected by Western Washington’s Border Policy Research Institute, the number of people passing through the five Whatcom County border crossings through May totaled just under 4.6 million, nearly identical to the previous year. In the past year the Canadian dollar has remained fairly stable, hovering in the 75-cent range.
Whether the Canadian dollar stays in the 80-cent range will depend on a variety of factors, according to Globerman – one factor that has helped the loonie recently is the weakening U.S. dollar.
If there’s a real indication the U.S. is going to lower business taxes, the greenback may strengthen, stalling the Canadian dollar rally. Oil prices are also a factor – if it goes down, the loonie will probably also weaken.
Some expect the loonie rally to be short-lived. Laurie Trautman, director at the WWU Border Policy Research Institute, believes it has peaked and the current rally will not immediately change border crossing shopping habits.
“I do expect the volumes to continue a trend similar to what we saw last year,” Trautman said in an email.