The loonie has its ups and downs, and with each major fluctuation come challenges for some and opportunities for others.

The Canadian dollar hit its lowest level in three years this week, falling to 93.98 cents US on Monday — a long way from parity, where it was at the beginning of the year, and the first time it has closed below 94 cents since June 2010.

The loonie has fallen almost seven per cent since the beginning of the year, and some analysts and traders predict that it will keep dropping, with Goldman Sachs expecting it to trade as low as the high 80-cent level next year.

Observers have attributed the recent decline to a combination of the strengthening of the U.S. economy, weaker-than-expected inflation at home and the Bank of Canada's decision to keep the interest rate at one per cent. The recovery in Europe has also played a part, as investors' need for a safe haven for their money diminishes.

While Canada is increasingly looking to diversify its trading partners, the economy is still highly dependent on doing business with the U.S., and whether you are rooting for the dollar to rally or revelling in the loonie's recent decline largely depends on what side of that business relationship you're on.

Who loses when loonie slumps?

Canadian consumers and travellers are some of the biggest losers when the dollar is low because their money doesn't go as far in the U.S. 

Conversely, when the loonie is strong, Canadians often use the opportunity to make cross-border shopping trips or travel outside the country. 

If you're a frequent cross-border shopper, you might benefit from getting a U.S. dollar credit card that is tied to a U.S. dollar bank account. That will save you the approximately 2.5 per cent that banks charge for foreign currency transactions when you use your Canadian credit card south of the border.

U.S.-Canada border

Canadian companies that export goods to the U.S. benefit from a low Canadian dollar. Merchandise exports to the U.S. totalled $30.5 billion in September, according to Statistics Canada. (Jason Kryk/Canadian Press)

When the dollar is near or above parity, consumers increasingly expect to see that reflected in stores on their side of the border, too. In the past, when the dollar has been strong, such as when the loonie peaked at a record $1.10 US in 2007, failure to adjust prices downward to more closely reflect their U.S. counterparts has sparked public anger.

"As the dollar reaches parity, retailers get a lot of it — a lot of people out there pointing fingers, complaining about gouging," Mark Beazley of the Retail Council of Canada told CBC News in an earlier analysis of the loonie's fluctuating fortunes .

A weak dollar lures U.S. consumers north, which is good for certain sectors of the economy, such as tourism and real estate, which can see an uptick in interest from international buyers.

Canada's professional sports teams can be hurt by a weak dollar because their ticket sales are in Canadian dollars, but expenses such as player salaries and mandatory revenue sharing with the leagues they are part of are owed in U.S. dollars. A low dollar played a role in the loss of Quebec City's and Winnipeg's hockey teams in the mid-1990s. The Nordiques and the Jets both fled south of the border, although the Jets are now back in the NHL.

The Canadian film industry is one sector that benefits from a weak dollar because it helps the industry lure Hollywood productions north.

Strong dollar hurts manufacturers

Companies that export goods to the U.S. or that have a lot of international sales benefit from a weak dollar. One such example is the Montreal-based dairy producer Saputo, with half of its revenue coming from overseas sales. Its Canadian sales are unaffected by the currency decline, but it gets more bang for its buck on the rest.

Conversely, a strong loonie makes it more expensive for Canadian manufacturers and exporters to sell their goods south of the border — everything from lumber to auto parts. A rising loonie also makes it cheaper for Canadians to import goods from the U.S. Industry can use the opportunity to purchase cheaper U.S. technology that can improve productivity.

When the dollar is high, American companies move in to snag a greater share of Canadian markets, and Canadian companies facing increasing competition from the south start paring down their operations in an effort to increase efficiency and lower costs.

Investors, however, face a currency risk when the loonie is strong. Even if a stock price nominally rises in U.S. dollar terms, Canadian owners of the stock can find their returns reduced or even eliminated once the market value is converted to Canadian dollars. In that case, financial advisers sometimes recommend hedging investments through tools such as exchange-trade funds to offset the effects of changing currency valuations.

As a whole, the manufacturing industry has been trying for years to diversify its customer base to reduce reliance on the U.S. market. 

Buy American provisions have sped up that process and caused Canadian firms to seek new markets. But when you're used to feeding the world's largest economy, it's a tough process to find new trading partners. Canada exports more than $330 billion worth of goods and services a year to the U.S. and imports slightly less than that, according to 2012 figures from Statistics Canada. The value of trade with the next biggest trading partner, the European Union, is a fraction of that, at $21 billion and $36 billion, respectively.

According to the Canadian Manufacturers and Exporters, a strong Canadian dollar is never good for business, but massive fluctuations are worse, which is why many companies have been exploring ways of minimizing the impact of currency movements, such as pricing products in the currencies of the countries where they do business or investing in financial instruments that hedge against exchange-rate fluctuations.

"It's not so much the value but the volatility," said Jeff Brownlee, the association's vice-president of communications. 

With files from The Canadian Press