Have you been following the Exchange Rates Lately?
1995 – USD – 1.3726
1996 – USD – 1.3618
1997 – USD – 1.4267
1998 – USD – 1.5422
1999 – USD – 1.48584024
2000 – USD – 1.48520240
2001 – USD – 1.54841633
2002 – USD – 1.57035976
2003 – USD – 1.40146175
2004 – USD – 1.30152024
2005 – USD – 1.21163240
2006 – USD – 1.13409360
Translation: For $100.00 USD in 2006 … we would convert it to $113.41 Canadian dollars.
For 2007 .. Here are actual exchange rates according to the Bank of Canada, on particular days …
January 1, 2007 ==> USD – 1.1649
January 15, 2007 ==> USD – 1.1681
February 1, 2007 ==> USD – 1.1755
February 15, 2007 ==> USD – 1.1639
March 1, 2007 ==> USD – 1.1713
March 15, 2007 ==> USD – 1.1758
April 1, 2007 ==> USD – 1.1561
April 15, 2007 ==> USD – 1.1310
May 1, 2007 ==> USD – 1.1089
May 15, 2007 ==> USD – 1.0977
Friday, May 25, 2007 ==> USD – 1.0796
This was the lowest the exchange rate has been in the past 10 years.
All-time High was: High (18/01/2002) – 1.6125
All-time Low was: Low (20/08/1957) – 0.9422 (Canadian dollar actually worth more!)
QUESTION: WHY IS THE RATES GOING DOWN?
In the past, when exchange rates go up and down here in Canada .. I like to look at it from a simple point of view .. it’s either:
* Our Canadian Prime Minister (Stephen Harper) is doing something right, or
* The USA President (George W Bush) is not doing something right …
Yes – I’m a simpleton and can only offer the above two possible explanations. If you can offer other possible suggestions or explanations why the rates are going down .. feel free to add them in the comments!
PS: In Canada: We Report Our Earnings in Canadian Dollars
For income earned throughout the year but in a foreign currency, like USD dollars (instead of CDN dollars), Canada Revenue allows you to choose either the actual exchange rate on the date of the transaction, the average exchange rates during the months of the transactions, or the average recognized exchange rate for the year.
For myself and my clients, I always choose the best scenario that benefits me or my client. For instance, with stock transactions .. I want a higher exchange rate for purchases and a lower exchange rate for sales transactions. I will compare the actual daily exchange rates to the CRA average rate and make my choice. Once chosen however, I always use that method and never change the costing calculations in the future. However, I will mix them up within the same non-RRSP investment account.
On one particular client of mine, who is not a day trader, but is quite active in the online investing activities .. had a lot of transactions trading one particular stock in the USA markets (NASDAQ). I calculated what the actual converted costs and selling prices would be in Canadian dollars using the actual rates from the Bank of Canada, and compared it to the CRA average rates, and using the actual rates … the net capital gains for the year was reduced by almost $20,000! It was worth the extra hours and fee added to my client’s billing. On another stock, it was more advantageous to use the average rate, although it knocked off just a little of the gain – every bit helps. In the Stock Portfolio section within my Tax Software for the client, I would indicate which method I used to calculate the adjusted cost base (ACB) for the stock, to remind me to continue with that method next year – if there were shares on hand at the end of the year.
Comparing The Dollar to Gas Prices in Winnipeg
I know .. I know .. there is no comparison .. but, I do watch for the lowest gas prices at the pumps around Winnipeg, Manitoba .. I can’t seem to find an easy chart of the exchange rates for 2007 (and am too lazy to recreate it myself on Excel) .. but I wonder how the exchange rate decreases compares to the gas price increases?