BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

November 10, 2010 11:53 ET

Strong Loonie Holds Silver Lining for Business Owners

BMO Survey: Impact of High Dollar on Canadian Businesses

- BMO Survey Reveals More Than Two-in-Five (44 Per Cent) Business Owners Surveyed Say They Haven't Felt the Impact of a Shifting Dollar

- BMO Says Stronger Dollar Represents Significant Opportunity to Import Lower Cost Equipment and Machinery

- Businesses Say Hedging Currency is a Key Buffer to Offset Potential Negative Effects

TORONTO, ONTARIO--(Marketwire - Nov. 10, 2010) - A BMO survey released today found that more than two-in-five business1 owners surveyed (44 per cent) say they have felt no impact from the shifting Canadian dollar.

"As the economic recovery takes hold, the relative strength of the Canadian dollar does not appear to be a major negative factor for many Canadian business owners," said Cathy Pin, Vice-President, Commercial Banking, BMO Bank of Montreal. "In fact, parity with the U.S. dollar could represent a significant opportunity, when it comes to importing equipment and supplies at a lower cost."

The opportunities when it comes to imports could conversely mean challenges for those Canadian businesses that have a strong export base, in particular, in the U.S. market.

The survey also found:

  • Nearly one third (29 per cent) of businesses citing an impact say their bottom line has been most affected by the decline in price competitiveness as the cost to Americans of buying Canadian goods has increased
  • When it comes to strategic business decisions to offset a rise in the loonie, the top three approaches are currency hedging, looking for new suppliers and improving productivity

Given the recent volatility in foreign exchange rates, implementing currency hedging strategies should be a priority for business owners as a way to lessen the impact of exchange rate fluctuation on the bottom line and provide more consistent pricing for customers.

"While it's expected that the Canadian dollar will rise above parity in 2011, the effects can be offset by putting a currency hedging strategy in place to insulate the business," said CJ Gavsie, Managing Director, Corporate & Institutional Foreign Exchange Sales, BMO Capital Markets. "Furthermore, exporters and manufacturers that are heavily exposed to the American market will need to cut costs to remain competitive and retain market share."

The Harris/Decima telephone poll was conducted from May 3rd to 19th, 2010 and is based on a sample of 427 Canadian businesses with between 50 and 499 employees and revenues between $5M and $75M annually. *Results have been weighted against the known universe for such Canadian businesses.* A sample size of 427 garners results that are accurate within ±4.7 percentage points, 19 times out of 20.

1 In this release, "Canadian businesses" refer to those that employ between 50-499 employees and have revenues between $5M and $75M annually.

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