Over the past few months, there have been many fluctuations in the prices of commodities and the value of things we use in our everyday lives. This includes record inflation rates of 3.4 per cent in Canada 4.2 per cent in the United States. A significant increase in the Canadian and American dollars has impacted students across the world in surprising ways.
The price of the American dollar has decreased exponentially over the past year, which has caused the exchange rate with Canada’s largest trading partner to change, benefitting domestic students in Canada.
However, international students in Canada, especially those from America, will see a rise in prices when attending school here.
The effect of the change in currency can be dramatic, but with the right tools, a smart investor can navigate finances while keeping their cool.
The effects of a rising Canadian dollar
Many people do not follow currency. This means they are blind to the dangers or opportunities fluctuation can pose to domestic students. The changes in the American currency can result in items made in America becoming cheaper for Canadians.
I have recently noticed that certain school items such as textbooks or online purchases are more affordable as many of them are produced in America, which can benefit Canadian consumers.
However, for students who may have their investments in the American market, this can hurt their investments.
How a rising Canadian dollar can hurt international students
As the American dollar continues to decrease, the price of moving to Canada from the U.S. continues to increase. In May of 2021, the Canadian dollar reached 82 cents on the US dollar—the highest exchange rate since 2017. This may not seem like a lot. However, going to university in a foreign country can mean thousands of additional dollars in costs.
For students who live outside the United States, this can also be damaging. The American dollar is recognized as the international currency by influential organizations. As it continues to decrease relative to other currencies, international students that own assets in American dollars will be affected.
The Canadian dollar’s value has increased compared to the Chinese yuan or other major Asian currencies, where over 140,000 international students in Canada travel from. As the Canadian dollar increases on the global stage, this will mean that the price to go to Carleton will increase for international students, potentially reducing the number of applicants.
How investors can profit from a rising Canadian dollar
Although the future of the Canadian dollar is uncertain and difficult to predict, there are still ways to profit off of the increasing Canadian dollar. Here are three of my favourite stocks to buy with a rising Canadian dollar:
Dollarama Inc. (DOL.TO)
Dollarama is not only a stock to buy due to the change in the Canadian dollar, but also an excellent growth story. The company has had over 2,000 new stores open in the last decade, with the stock growing 75 per cent in the past five years.
When the Canadians dollar strengthens, it creates great opportunities for companies who buy their stock from foreign countries to resell at a higher rate. As the Canadian dollar is worth more, it gives Dollarama better profit margins.
Air Canada (AC.TO)
As the Canadian dollar becomes more valuable, it gives Canadians the ability to travel at lower prices. While Air Canada stock is low now, I expect to see it increase in value substantially.
Because travel is cheaper at the moment, Canadians have more reasons to consider taking a vacation. As COVID-19 becomes less of a threat internationally, more people will want to travel. This stock has many reasons to recover in the next couple of years.
Horizons U.S. Dollar Currency ETF (DLR.TO)
Finally, the American dollar’s fall in value has hurt many stocks that are directly tied to the American dollar, such as the Horizons U.S Dollar Currency Exchange Trade Fund (ETF), which has a price that moves with the American dollar.
This stock is an outstanding stock to pick up for long-term purposes. As the American dollar has a history of rebounding, buying this stock while the American dollar is so low may have a substantial upside. The stock is not volatile, meaning it has little risk.
Conclusion
As the change in the Canadian dollar continues to affect our everyday lives, it is up to us to assess what is best for our unique financial situations. Buying stocks in different economic areas is one way to keep your money safe.
All views expressed in this column are the opinions of the columnist and in no way constitute professional advice.
Featured image by John McArthur.
