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How Currency Moves Quietly Boost (or Hurt) Your TSX Portfolio

Navigating the complex world of currency can significantly impact your TSX investments; explore strategies and promising stocks to mitigate or harness currency effects.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 23, 2025 3:45 pm EDT

Key Points

Currency fluctuations, like a stronger or weaker Canadian dollar, affect foreign revenues and profitability of TSX-listed companies.
Companies like Canadian National Railway (CNR) thrive by managing costs and having diversified revenue streams that cushion against currency volatility.
CAE benefits from earning foreign revenue which supports stability in a weaker CAD environment, making it a resilient investment choice.

Currency holds a tricky spot in any investment portfolio. Whether you’re investing directly in currency or just stocks that are affected by it, the role of currency is enormous. Therefore, currency movements can significantly impact the TSX as well, especially for international companies. So, let’s look at some strategies on how to mitigate or even leverage these effects and some TSX stocks to consider.

man in suit looks at a computer with an anxious expression — Source: Getty Images

Currency and the TSX

First, let’s take a deeper dive into how currency can affect your TSX portfolio. First, there’s an appreciating Canadian dollar. When the CAD strengthens, it can actually negatively impact companies that earn revenues in foreign currencies, especially the USD. These revenues are worth less when converted back into CAD. Meanwhile, the reverse is true as well. When there’s a weaker CAD, it benefits companies with foreign revenues, as those revenues translate into more CAD, potentially boosting profit.

This goes beyond a mere shift as operational costs come into play as well. Companies that have costs denominated in foreign currencies may be impacted by currency fluctuations, and an appreciating CAD can reduce these costs and improve margins. There’s also competitive positioning to consider. A strong CAD can make Canadian exports more expensive and less competitive on a global scale, and vice versa. Therefore, currency volatility can seriously affect investment decisions.

Two to consider

With that in mind, where do investors start when it comes to investing in TSX stocks? Two options might be Canadian National Railway (TSX: CNR) and CAE (TSX: CAE). Let’s start with CNR stock. This company is part of a railway duopoly, with diversified revenue streams that run across North America. CNR’s diversified revenue base also runs across different segments like grain, fertilizers, and automotive. These can help cushion currency volatility impacting any sector.

Furthermore, its cost management is one to admire. The company focuses on cost control and efficiency that can mitigate the effects of currency fluctuations on profitability, as well as its strategic investments. Add on a solid operating ratio and improved earnings, and CNR is a top choice during currency fluctuations.

What about CAE? This international aerospace stock earns a significant portion of revenue in foreign currencies, specifically USD. This could benefit a weaker CAD, especially with a substantial backlog for more revenue and stability against volatile currency impacts. Long-term investors will love this, as well as its regulated civil and defence operations, allowing CAE to leverage opportunities in different markets.

Bottom line

Currency fluctuations can be scary for investors who aren’t sure what exactly is even going on. Honestly, a weaker CAD can be good for most companies to allow for competitiveness and foreign investments. But CNR and CAE are strong in any portfolio, providing resilience against currency volatility.

CNR offers a stable dividend, returns, diversification, and revenue. Meanwhile, CAE holds international revenue streams and a huge backlog. Therefore, both of these TSX stocks are sold choices to capitalize on currency fluctuations. Yet as always, make sure the strategy aligns with the rest of your portfolio, and always speak with your financial advisor before making any investment decisions.