The lower Canadian dollar is helping to boost the bottom line for small businesses exporting products to the United States, but a chunk of those profits are being eaten up by the higher cost of importing goods from the country.
Big swings in the value of the loonie are changing prices for inputs and value of sales, making it harder for businesses to plan and ensure profitability.
To cope, many small businesses are trying to stabilize their costs through foreign exchange products that lock in an exchange rate for a certain period of time, known as hedging and “natural hedging,” such strategies include setting up a bank account or even operations in the U.S.
“Companies can’t just take a low dollar itself and count on that to make them competitive. They have to continue to invest in new products and new technologies and an awful lot of that depends on imported equipment and goods,” said Jayson Myers, president and chief executive of the Canadian Manufacturers & Exporters.
He said hedging strategies could be crucial for some companies doing business in the growing and often lucrative U.S. market.
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