Sometimes exchange rates hurt, sometimes they please. In a recent trip to NYC, the C$ to US$ conversation was very pleasing. Every visit to NYC entails fulfilling a standing action item to check out the latest in All-Clad cookware. Usually this is at Zabar痴, perhaps the best deli and cookware store we致e ever been in. The expansion of Williams-Sonoma and Crate & Barrel have somewhat cut into the steady Zabar acquisitions though. No matter where we buy it, All-clad is just simply awesome cookware: it looks great, has a huge variety, and very good heat distribution. We致e been steadily expanding our collection since we got our first as a wedding present.
Over the past few years, it wasn稚 really worth it to buy in NYC as the cost in C$ hasn稚 been worth it. I致e regularly checked, and there might be some savings but not enough to justify taking an item back to Vancouver. The C$ has risen over the past few years from the low 60s to the low 80s. And it痴 now really worth buying goods in the US rather than in Canada. A case in point is the 4 quart saute pan. We have the 6 quart, which is great for doing large amounts of braised lamb shanks etc., but it痴 a beast. We wanted a smaller one. The 4 qt has a suggested retail price of US $200. In our favourite store in Vancouver, the 4 qt is about CA $330. Williams-Sonoma has it for regularly US $190 and Zabar痴 has it for US $170. Adding the taxes and exchange rates, purchasing at Zabar痴 is around CA $230, a heck of a deal. I was also excited by the new fondue, wire mesh steamer, tool line additions, fish poacher, and grilling pan, but I decided to just get the saute pan and a 10 inch non-stick frying pan on this trip.
Arbitrage
Now any time there is this kind of arbitrage opportunity, various economic theories say it will go away soon. What *should* happen is that the Canadian stores will end up dropping their prices. They probably negotiated their exchange rate a year ago, say at 73 cents. When they renegotiate for next year, it might be 82 cents. So they ought to be able to drop the price by about 15 percent, which would significantly close the gap.
There痴 good chances the savings won稚 be passed onto the consumer. The travel business is an example where it hasn稚 directly happened. When the dollar was in the low 60s, all the travel excursion carriers cried about the exchange rate and raised prices by 10% through an 兎xchange rate surcharge�. Now this surcharge hasn稚 been removed. Last winter we snowbirded to the Mayan Riviera and the all-inclusive costs have gone up substantially over the past few years. They seem to be passing some of the savings to the consumer by offering last minute cut rate deals. We got about 25% off the 澱ook� rate by doing a last minute deal. But it is kind of funny how the 兎xchange rate surcharge� hasn稚 gone away even though the dollar has appreciated by almost 33% since they brought the surcharge in.
While it lasts, we値l probably increase our US purchases, which is the US Fed and Bank of Canada痴 desired behaviour. You壇 think that this would cause less inflation in C$ so that Canada wouldn稚 have to raise interest rates to keep inflation down, but I guess it takes some time for my purchases to affect interest rates :-) Maybe a pre-Christmas trip to SF is in order�
