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Feeble loonie won’t scare Canadian shoppers away from U.S. border

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The Canadian dollar has dipped to 95 cents against the U.S. dollar, the lowest exchange rate for the loonie since November 2011, but that is not expected to hurt north country businesses catering to Canadian shoppers.

It’s true that the lower exchange rate might cause a small reduction in Canadian traffic to the north country, said Gary S. DeYoung, executive director of the 1000 Islands International Tourism Council. But he said the weaker loonie is still offset by savings Canadian shoppers realize from the lower sales tax, better shopping deals and lower gasoline prices here on the U.S. side.

Through the eyes of a well-informed Canadian shopper, Mr. DeYoung said, shopping in the north country will still be considered economically favorable. Canada’s dollar would need to drop another 5 to 10 cents in value, he said, to make staying home instead of crossing the border to shop the wisest choice for Canadians.

“At 95 cents, it’s still an advantage for Canadians to shop here,” Mr. DeYoung said. “It would have to be in the 80s to have an impact, when you factor in the sales tax and items that are less expensive here. Canadians know what the best deals are. Tires, shoes and dairy products tend to be at a better deal on the U.S. side of the border.”

Sales tax in the province of Ontario is 13 percent, compared with 7 percent in St. Lawrence County. Also a boon for Canadians has been the new customs rule that took effect last year, increasing the amount of merchandise they can bring back duty free. Before, Canadians could bring back only $50 per person in merchandise after an overnight visit and $200 after 48 hours. Now the limits are $200 after 24 hours and $800 after 48.

“I think the average Canadian is much more aware of the economics than Americans are on this side,” Mr. DeYoung said. “They’re going to do the calculations. If they buy $1,000 in tires, it’s going to cost you a little bit more in taxes there” even with the weaker Canadian dollar.

Even so, Mr. DeYoung said, there will likely still be a portion of Canadians deterred from making trips because the weaker loonie has changed their attitudes.

“Theoretically, you should start to see a little less traffic now,” he said. “It’s amazing how closely the exchange rate directly impacts the fluctuation of traffic.”

The loonie was worth $1.03 in September 2012 before gradually sliding over the past nine months. But the Canadian dollar is expected to recoup losses in 2014 as the country’s domestic economy improves, according to a July 2013 foreign exchange outlook by Scotiabank, one of Canada’s leading financial institutions.

“A broadly stronger U.S. dollar leaves the Canadian dollar vulnerable to near-term weakness,” said Camilla C.B. Sutton, the bank’s chief currency strategist, in the study. “But there is a lot of bad news priced into the Canadian dollar, which should contain the currency within a 95-cent-to-parity range (with the U.S. dollar) over the medium-term.”

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