How the US /Canadian Exchange Rate Affects the Salary Cap

Roughly, 30% of NHL league revenues are in Canadian dollars.  The Canadian revenue must be converted into US dollars, in order to determine the salary cap. Therefore, the effect of US/Canadian  exchange rate move can alter the salary cap either way. Per the CBA, the League uses the average of the exchange over a period from July 1st a to June 30th.

Let’s  take a look at how the exchange rate affects the salary cap.
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For the sake of argument and ease,
1) NHL revenue is flat from season A to  season B
2) The Canadian dollar has appreciated 5% over the same period
3) League revenues $100 for both years.
4) Canadian revenues is $30 Canadian dollars for both years.

Convert  the Canadian Revenues into US dollar: multiply Canadian$30 * 1.05(exchange rate appreciation) = US$ 31.50

Total  League Revenues would be $101.50 Total revenue would increase by 1.5% and the cap would increase just on the Canadian dollar appreciating against  the US dollar.

The flip side would be the cap would go down if the Canadian  dollar depreciated against the US dollar.

Now, let’s take a look at the real exchange rate and the effect on the 2011-12 salary cap.

2009-2010 average exchange rate was 1.0559
2010-2011 average exchange rate through today 1.0150
(source Bank Of Canada)

This means that the Canadian dollar has appreciated 3.8% from year to year through today.

If the revenues are flat in both countries and the exchange rate stays roughly around here, then the cap should increase just based on the exchange rate move this year.