Diving Canadian Dollar has Made Holiday Travel More Expensive

Currency Exchange Toronto“Canadians planning to travel outside the country are in for a rude awakening. The dramatic decline of the Canadian dollar has suddenly made travel a lot more expensive. If you think last year’s vacation budget will stretch just as far – you are in for a shock.” Says Rahim Madhavji, President of President of Knightsbridge Foreign Exchange, a currency exchange Toronto company.

In 2013, the loonie was worth more than the US dollar. Since then however, the Canadian dollar has gone into a downward spiral, depreciating by over 20%. One of the main culprits is oil prices, which have dropped by over 50% due to the tremendous oversupply of oil in the market and OPEC’s decision to not cut production. This has significantly impacted Canada as oil extraction accounts for about 3% of Canada’s GDP and crude oil about 14% of exports. Not to mention a number of businesses that support the oil and gas sector. Even the Bank of Canada was concerned about the sharp drop in oil prices.

But just how much will you suffer when you travel. For example, if you were in the United States in 2013, CAD$1,000 would have bought you about US$986. Today, CAD$1,000 would only buy you US$794. That’s a steep drop! If your budget hasn’t increased, you will have significantly less money due to exchange rate fluctuations. You better starting thinking ahead and more smartly if you want to stretch your dollar farther.

Those planning a holiday in the United Kingdom, Thailand, and China will also see their Canadian dollar stretch less this year than 2013, as will newlyweds heading to popular honeymoon destination countries that have pegged their currency to the US dollar. The dream for many brides of travelling to popular hotspots is a little more costly this year if you’re travelling to destinations like Maldives and Mauritius, whose currencies are tied to the US dollar.

If you want the biggest bang for your buck, the best advice is to travel within Canada or book trips to Mexico and the Caribbean where deals are better. Be careful to check US and Canadian dollar prices to ensure they simply have not marked up the Canadian dollar prices in these places. With the Canadian dollar having lost so much value relative to the US dollar, travelling within Canada is something to consider to get the best bang for your loonie. Those ads for Newfoundland and Labrador may seem a bit more appealing this summer. Plus, you’re also contributing back to the Canadian economy.

Europe is also an option to consider as the Canadian dollar has lost value but so has the Euro vs. a broad range of currencies, which makes the exchange rate today similar to what it was two years ago. You can thank the struggling European economy and Greece for the weak Euro.

For the future, buying your foreign currency in advance can also be a good idea, along with using a foreign exchange broker, such as KnightsbridgeFX.com, rather than the banks which provide hefty mark-ups on the rates. Buying in advance essentially allows you to have cost certainty as you know your exchange rate in advance instead of taking the chance the Canadian dollar may fall. Moreover, a currency specialist can help you get much better exchange rates than the banks. Also, you may want to consider buying in bulk if you travel frequently, typically you get better exchange rates the larger the amount.

Another tip is to take precaution when travelling and using your credit card outside of Canada. Resist the urge to pay in Canadian dollars rather than the local currency as this will turn out to be more expensive. This is known as dynamic currency conversion. You may end up paying twice the fees as the credit cards will charge their own fees on top of the cost of the purchase.
Data
CAD/USD – Canadian dollar weaker
April 15, 2013: 0.9855
April 13, 2015: 0.7935

CAD/EUR – Canadian dollar about the same
April 15, 2013: 0.7523
April 13, 2015: 0.7498

GBP/CAD – Canadian dollar weaker
April 15, 2013: 1.5581
April 13, 2015: 1.8479


Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.