The rising value of the loonie has more Canadians making plans for a trip across the pond, travel agents say.

 

“We’ve had really good numbers for trips to Europe. It’s been steady, strong growth to a wide variety of markets across Europe,” said Sean Shannon, managing director at Expedia.ca, an Internet-based travel website.

 

“There’s more four star hotels being booked than three star hotels. It’s a bit like winning the lottery. People feel wealthier so they want to treat themselves,” Shannon said.

 

“People don’t pull out their calculators, but it’s sort of intuitive. People sense that it’s a good time to go and it may cost me more if I wait until next year.”

 

The Canadian dollar isn’t just having its way with the U.S. dollar. Over the last two years, it has moved up 14 per cent against the Euro and 50 per cent against the pound, in some cases, touching record highs.


These powerhouse currencies are increasingly tarnished by mounting debt and fiscal concerns.


The loonie, meanwhile, keeps on soaring. Fiscal prudence, blooming economic recovery, demand for commodities, and the likeliness of higher interest rates are the wind beneath its wings.


It’s enough to impress even seasoned currency experts and economists.


“The fact that the Canadian dollar was able to gain ground in an environment of a rising American dollar, that’s impressive. It suggests there is much more to the Canadian dollar than just weakness elsewhere,” said Bejamin Tal, economist at CIBC World Markets.


Among other things, investors are impressed that Canada’s banks did not need a rescue package in the wake of the credit crisis, the domestic economy is much stronger, the housing market has remained steady, and the jobless rate still remains much lower than in the U.S., Tal said.


On top of that, prices for commodities have remained strong through the recession, thanks to steady demand from China and India. It now seems likely that the Bank of Canada will move up interest rates before the end of the summer, before the U.S. Federal Reserve makes a similar move. That will also be a positive for the currency.


“All those positives are getting the attention of investors all over the world,” Tal said.


The foreign exchange market is one of the largest markets in the world, far larger than the stock markets. By some estimates, about 3.2 trillion (U.S.) worth of currency changes hands every day.


In March the Canadian dollar reached a 25-year high against the pound. More recently, the moves have been dramatic. The pound averaged around $1.79 Canadian during the summer of 2009 but it was worth only $1.55 Canadian by March, the Conference Board of Canada noted in its latest five-year travel forecast for Europe.


“The higher Canadian dollar will result in travelers paying less when travelling to Europe and in the U.K. over the next couple of years,” the Conference Board report said.


“The slow rebound in the economies of Europe will also tend to keep travel prices down which will provide a further incentive for Canadians to visit Europe and the U.K.”


Against the Euro, the Canadian dollar is at its highest level since January 2006. Last summer, the Euro was worth $1.57 Canadian. That declined to $1.40 Canadian in March.


“Certainly the prospects for the U.K. changed rather dramatically with the onset of their own housing crisis real estate crisis and financial crisis, and now a challenging fiscal picture,” said Stewart Hall, economist with HSBC Canada Inc.


Investors are worried that Britain is heading for its first minority government in more than 30 years, and that leaders will lack the fiscal discipline to deal with deficits.


“Canada now is upfront and up on people’s radar screens,” Hall said. “We know there is good appetite from foreign accounts looking at the profile and saying, 'We have a lot less headaches with Canada.’”