We recommend that finance managers take the following steps to prepare:

Focus on the data. Given the volatility of exchange rates over the past few years, corporate finance departments are increasingly equipping themselves with the types of forecasting and market-monitoring tools that were once available only to active foreign exchange (FX) traders. Many corporate financial management platforms incorporate automated data feeds that provide both real-time and historic information about FX rates. Companies are increasingly relying on these high-speed data and analytics systems to manage their FX exposures.
Consider buying forward contracts for commodities. As commodities rebound, the Canadian dollar will likely recover. For companies with significant exposures to, say, the price of oil, now could be a good time to lock in today's prices—in today's dollars—for future purchases.
Rethink financing strategies. The U.S. Federal Reserve has indicated that it will continue to raise interest rates, and Canadian policy is likely to follow suit. As borrowing costs rise, we can expect the Canadian dollar to rise as well. Companies considering a capital investment or refinancing should map out a strategy now, while rates are still relatively low.

One caveat to the rosy forecast for the Canadian economy overall is the unpredictability around the possible renegotiation of the North American Free Trade Agreement (NAFTA). If the agreement is restructured, it will likely affect U.S.-Canadian trade relations. So far, President Trump's protectionist rhetoric has largely spared America's northern neighbor, although any shift in U.S. policy toward Mexico would likely have some impact on trade with Canada.

Instant Insights /

Covering the USD–CAD Spread

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