How Has the Rise in the Canadian Dollar Against the U.S.dollar

question 128

Essay

How has the rise in the Canadian dollar against the U.S.dollar affected the following businesses; a.Automobile assembly plants in Canada, b.an importer of Chinese manufactured clothing, c.a software developer with a branch plant in India, d.a Canadian tourist traveling to France.
A.Most auto assembly plants are primarily producing for the U.S.market.This means that a rise in the Canadian dollar will increase costs and make them less profitable.This will diminish their low cost advantage vis-à-vis the U.S.and may lead to plant closures, particularly among GM, Ford and Chrysler.This can also have a spin off effect among parts manufacturers.
B.an importer will find his costs decreasing, because the Chinese yuan is tied to the American dollar.This will lead to a choice for the importer of either reducing his prices to reflect the savings from the increased value of the dollar or letting them stay the same so they can enjoy higher profits.
C.A software developer in India will find his costs may or may not decrease, because the Indian rupee floats against all other currencies.This means that the rupee may increase or decrease against the Canadian dollar.It is most likely that the exchange rate will remain the same between the Canadian dollar and the rupee, because both countries do a lot of trading with the U.S.
D.The tourist may not enjoy any savings simply because the Euro has been also appreciating against the U.S.dollar.

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Definitions:

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