A weakening Canadian dollar is positive for most of the country’s companies, boosting profits earned in U.S. dollars relative to costs incurred in the local currency, Moody’s Investors Service said in a report.
Companies in the energy, forestry and mining sectors that have most of their production in Canada while selling their products in U.S. dollars will benefit the most, Moody’s said. The currency has slid 3.7 percent this year against the greenback, the biggest loser against 16 major peers.
“Part of assessing the impact on a company is reviewing exposures to U.S. dollar-denominated costs, debt and equipment purchases, all of which increase with the depreciation of the Canadian dollar,” Bill Wolfe, an analyst at Moody’s, said in a statement from the ratings company.
Canadian National Railway Co. and Canadian Pacific Railway Ltd. will also benefit from a weaker loonie because both have profitable U.S. subsidiaries, the report said. Performance at some other transportation companies, such as Air Canada, will be damped because their revenues are denominated in Canadian dollars while they buy fuel in the U.S. currency.
The Canadian dollar will depreciate to C$1.14 to the greenback, the weakest level since 2009, by the end of the year, according to the median estimate of a Bloomberg survey of analysts. The loonie strengthened 0.3 percent today to C$1.1024 per U.S. dollar in trading in Toronto. One Canadian dollar bought 90.71 U.S. cents.