The High Flying Loonie

Now that the Canadian dollar has effectively reached parity with the United States dollar, a number of businesses can more easily expand into the American and international market. One of which is our banks. Benefiting from a tightly regulated market in Canada and making fabulous profits, they can use the Canadian dollars they have on hand to buy banks in other countries. The Globe and Mail reports that this process is underway:

Canada's two largest banks announced early Tuesday they are spending almost $11-billion (U.S.) to expand in the United States and the Caribbean, riding on the wings of the soaring Canadian dollar.

With the loonie now at or above par with the greenback for the first time in more than 30 years, No. 2-ranked Toronto-Dominion Bank stole the show by announcing its biggest acquisition to date: a deal to double its U.S. retail banking presence by taking over Commerce Bancorp Inc. for $8.5-billion in cash and stock — a transaction made possible in part by regulatory problems that led to the ouster of the New Jersey bank's founder at the end of July.

The news of TD's planned acquisition overshadowed confirmation from No. 1-ranked Royal Bank of Canada that it is buying Trinidad & Tobago's RBTT Financial Holdings Ltd. for $2.2-billion, in one of the largest recent acquisitions in the Caribbean.

But observers say there is little question that the high-flying loonie will make both deals easier for the acquiring banks to swallow.

If the Canadian dollar remains high, this will be an opportune time for Canadian business to expand southwards and buy competing firms in the United States.