The state of the USD and the CAD

Fluctuating oil prices, a new American president, rising interest rates in Canada – the past year has been quite a ride with regards to the North American economy and the foreign exchange rates. This is a fairly important aspect of our company due to the fact that the majority of our customers reside in the US and our primary transaction currency is USD (although you can also choose to use CAD).

Over the last year or so, the USD to CAD exchange rate plummeted from 1USD = 1.35CAD to 1USD = 1.22CAD, 9.6% drop.

While most of our income comes in as USD, most of our costs are in CAD. Since the majority of manufacturing is done locally (our furthest manufacturer is a one hour drive from Waterloo, ON), and since we pay all our salaries, taxes, shipping fees, rent, and packaging in CAD, we need to convert our USD income to CAD before we can pay for these costs. A falling USD value means less CAD when we convert our USD income to CAD.

It’s not all bad however, in the long term, a strong Canadian dollar means stronger international buying power and lower prices on items which are tied to the American dollar. Although we try to manufacture components as locally as possible, we will see some savings on imported components like motors and electronics.

So what this mean for our customers? Well for our Canadian customers, this is a great time to place orders while the CAD is strong. It’s like a discount granted by the strengthening Canadian economy! Perhaps this is why we’ve seen a small uptick in Canadian sales.

I figured it would be of interest to share with everyone, especially if you’re also a business which is also affected by these fluctuation foreign exchange rates. While economic instability makes running a company more complicated, I have a good feeling of things to come in the future.

Until next time…