Currency Exchange Rate Trends and International Student Recruitment

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TABS Report #3, Structural Elements of the International School Marketplace (available in the members only section of introduced the concept of international student recruiting as an “export industry” for a country’s boarding schools. True, for us, the movement of the students is from overseas to attend school in Canada or the U.S. But, the flow of tuition and fees is in the same direction, from overseas to here, and that is why economists categorize the transaction as the U.S. and Canada exporting boarding school services overseas.

At the time of Report #3’s publication, the U.S. was at the end of a more-than-a-decade long depreciation of its dollar, in part due to persistent trade and budget deficits. When the dollar—U.S. or Canadian—depreciates in value against other currencies, our boarding school services become less expensive for international families and demand rises. By contrast, when our dollars appreciate in value against other currencies, our services become more expensive and demand falls.

The past several years have seen a reversal of the previous, longer-term trends in exchange rates. The U.S. dollar has appreciated against most other currencies, while the Canadian dollar has depreciated. Essentially, the more recent trend is a story about commodity prices (e.g., oil & gas and minerals specifically). They have fallen substantially and so countries, such as Canada and Australia, for whom commodities comprise a large proportion of their exports have seen their currencies depreciate substantially. While this trend may hurt the country as a whole, and certainly hurts those invested in commodities, it benefits other exporters, such as those of us exporting boarding school services.

Consider the six countries with a substantial presence in the international boarding school marketplace. Over the past five years, the Canadian dollar has depreciated substantially against the currencies of four of the others—New Zealand, Switzerland, the United Kingdom, and the U.S. It has appreciated, but only slightly, against the currency of the other major commodity exporter in the group, Australia. (See Table.)

TABLE 1By comparison, the U.S. has seen its dollar appreciate against four of the other five currencies, and depreciate only against the Swiss Franc.

The end result of these changes in exchange rates is an increase in the competitive advantage of Canadian boarding schools, and a decrease in the competitive advantage of U.S. boarding schools against all competitors except Switzerland.

China’s recent exchange rate activity represents a special case. Their exchange rates had been set by the country’s central bank up to August 2015 when, suddenly, their currency was set free to “float” in the international market (i.e., have its value determined by market forces rather than by government fiat). This unexpected policy change made almost no difference in the Canadian dollar exchange rate, as both countries’ currencies are currently weak. For Chinese buyers, however, the currently strong U.S. dollar appreciated by 5 percent virtually overnight.

For Canadian schools, the long, slow, steady increase in competitive advantage in the Chinese market continues uninterrupted. For U.S. schools, the same increase has stopped and partially reversed.

Of course, one should keep in mind that what goes up often comes down, and vice versa. As with most trends, these may be temporary, and future movements are unpredictable.



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