The Weak Dollar and Franchise Values
The US dollar has depreciated significantly against other currencies over the past several years. Currency depreciation has a differential effect on an economy. For example, manufacturers who export their products abroad benefit, as their goods are cheaper in foreign markets, while manufacturers who purchase raw materials from abroad are hurt because they face higher input prices.
Currency exchange markets seldom affect the sports world. North American professional sports leagues that have teams in both the
The financial environment is quite different now. The chart below shows the Canadian dollar-US dollar exchange rate over the past five years. The Loonie has been trading roughly at par with the US dollar since last fall, and some analysts predict that this exchange rate will persist for some time.
A recent New York Times article points out that the value of Canadian NHL teams surged in the latest Forbes franchise value estimates, and that Canadian NHL teams appear to be attractive purchases for foreign investors. These events are not surprising, given that Canadian NHL teams have seen their payroll costs drop significantly relative to their US competitors.