While there is no doubt the rising Canadian dollar has hurt Canadian exporters, too often we focus on the US dollar to the exclusion of other currencies.
The following charts show the relative performances of several currencies during a 2-year period. The USD and CDN$ are used as reference points for the relative value of currencies from Australia, Brazil, China, India, Japan, Korea, Mexico, and Taiwan.
Consider two exchange rates that have tracked the USD over this two-year period. The Mexican Peso has traded within a relatively stable band. The Chinese Renmimbi (Yuan) is pegged tightly to the USD.
US exporters enjoy an advantage over Canadians in both these markets now. Canadian exporters face the same kind of exchange rate pressures as in the USA.
This chart shows the US dollar depreciating against a basket of currencies. Note that the USD falls relatively farther against some (Canada, Australia, Brazil) than against others (India, Taiwan). Note also that the Australian dollar and Brazilian Real have appreciated even more than the CDN dollar over this 2-year period.
The exchange rate shock varies widely from market to market. Canadian, Australian, or Brazilian exports will experience much less exchange rate pressure in each others markets than in the US market.
We now use the CDN$ as reference point to show its relative strength against several currencies. The CDN$ buys relatively more of those currencies above Index point "100", and relatively less of those below 100. Note that the weakest currencies, the USD and Mexican Peso, show a decline more than twice that of the Won and Yen. Therefore, Canadian and Australian exports should suffer less exchange rate pain in Korea and Japan than in the USA and Mexico.
Despite its attactiveness and proximity, Canadian exporters should look beyond the American market.
Don't forget that other factors, besides exchnage rates, influence the competitiveness and success of exporters.
