Wednesday, October 31, 2007

Weak US Dollar - 5 Steps to Avoid Losses

USD have steadily weakened over the last six calendar months relative to certain other currencies, specifically Canadian dollar (CDN). This article takes at looking at the alterations that have got happened. The chart shows the human relationship of USD v/s CDN.CDN have steadily appreciated from 0.63 USD in October 2002 to 1.03 USD in October 2007. The currency have appreciated by 40% over 5 years. As recently as January 07, CDN was at 0.85 USD (Source: Depository Financial Institution of Canada website).

Canada is an oil exporting country. It exports mainly to the US. Rising oil terms is said to be the chief factor that have strengthened the CDN. Added to this is the sub-prime crisis haunting the United States Capital markets. Let us travel through the deductions for concerns in Canada and how they can avoid losings owed to currency fluctuations.

Businesses that exportation to the United States would have got seen their grosses autumn from the beginning of the twelvemonth by over 15%. Businesses that bargain from the United States would have got seen their costs reducing by 15% over the same period. Services industry that bargain and sell services in Canada would not have got been directly impacted.Businesses that bargain trade goodss such as as aluminium would see their costs cut down as they do their payments in cheaper USD.Businesses that sell to the United States would seek to shift their activities to low cost states to go competitive. They would also seek and beginning their merchandises in United States to take advantage of the cheaper USD.

Bank of Canada Governor (quoted by Yahoo! News) states - "Canadian consumers are already benefiting from the higher dollar, but they shouldn't anticipate instantaneous terms accommodations or buying powerfulness equal to the greenback. The strong loonie is being reflected in less terms for gasolene and other merchandises including food.Here are some of the actions that concerns can take to cut down the impact of currency differentials.

A. Try and beginning cheaper merchandises that supply the same value. Today, it is much easier to compare terms across the globe.

B. Try and pay in USD for commodity and services that may be coming from across the border.

C. Try and acquire a terms addition from clients - may be possible lone in certain niches.

D. Rich Person a uninterrupted cost decrease program to cut down overall costs.

E. Change in concern premix of USD and CDN can be a good overall scheme for all situations.

F. Hedge is also an option - bank check with your Bank.

1 comment:

David Wozney said...

Re: “Weak U.S. Dollar ...

A “Federal Reserve Note” is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as having the value of 1/42.2222 fine troy ounces of gold.