There’s no getting around it: The falling Canadian dollar has been a serious drag for longtime U.S. investors in Canadian stocks. Fortunately, there are several ways to play a lower loonie, and one in particular that could provide an unexpected growth kicker.

But before we get into that, let’s review where the currency has been, where it stands now, and what we can expect in the months ahead.

At US$0.72, the loonie is a far cry from the heady days of the resource boom, when it traded above parity with the U.S. dollar.

And the lower exchange rate can also make the share-price performance of even the most fundamentally strong Canadian firms appear downright alarming in U.S. dollar terms.

Yes, while just about all of the stocks we cover are listed on U.S. exchanges, the declining exchange rate will still flow through to the share prices of their U.S. listings. That’s why it’s important to check the price chart for the Toronto Stock Exchange listings of any U.S.-listed Canadian stocks you hold before succumbing to panic.

While you’re at it, you should also look at a chart comparing the performance of the TSX-listed shares against the performance of S&P/TSX Composite Index, since the movement of the Canadian market can also weigh on a company’s stock. Last year, for instance, the S&P/TSX’s performance diverged markedly from the S&P 500, particularly during the fourth quarter.

If you have trouble pulling up a price chart for the Canadian market on the websites of your broker or your favorite financial data aggregator, then a broad-market exchange-traded fund such as iShares MSCI Canada ETF (NYSE: EWC) is a suitable alternative for benchmarking purposes.

How Low Can It Go?

With the loonie trading at its lowest level since 2003, it’s very likely near its ultimate bottom. But while the currency may have already hit its low for this cycle in late January, the market’s penchant for drama could cause the Canadian dollar to retest its low, just below US$0.69, or head even lower.

The consensus forecast among currency strategists surveyed by Bloomberg suggests the currency will bottom during the first quarter.

But these aren’t normal times, so it’s worth considering the outliers, those analysts whose downside forecasts deviate by a wide margin from their peers. Right now, no less an institution than Credit Suisse is willing to lead the race to the bottom, with a bold call that the loonie will bottom at US$0.625 during the fourth quarter. Notably, the analyst sees a moderate rebound, to US$0.75, in 2017.

Pressure’s On

What might drag the loonie even lower? Commodities, for one. During the resource boom, the currency loosely tracked oil’s ascent, but as crude crashes to new lows that correlation has tightened, particularly during the fourth quarter (See “The Limbo Contest.”)

Then there’s the U.S. dollar. The strong greenback is a consequence of the fact that the Bank of Canada and the U.S. Federal Reserve are pursuing monetary policies that are headed in opposite directions, at least nominally.

Despite the Fed’s first rate hike in nearly a decade, global market turmoil and disappointing economic data have traders betting that the U.S. central bank will be forced to stand pat for the rest of the year. Futures data aggregated by Bloomberg indicate that traders see just a 30.1% probability of another Fed rate hike this year.

That recent shift in sentiment prompted a sharp decline in the U.S. dollar, while speculation about possible OPEC production cuts pushed oil off its low. Those two factors account for the loonie’s recent ascent.

But relief could prove short-lived. The Canadian dollar will likely face additional pressure if the Bank of Canada lowers rates again. Futures data show the probability of a rate cut rising to nearly 60% by the central bank’s May meeting.

Nevertheless, the Canadian dollar is probably within 5% to 15% of its ultimate low. And while it could plumb these levels for the next few years, the low loonie makes Canadian stocks an attractive value play for U.S. investors with a medium- to long-term time horizon.

Four Ways to Play

Beyond value considerations, there are several different ways to play a lower exchange rate.

In the past, we’ve written about a few of them: 1) selecting Canadian companies with significant U.S. dollar-denominated earnings, such as those with sizable U.S. subsidiaries or exposure to rising U.S. demand for Canadian exports; 2) highlighting Canadian firms that stand to benefit from an increase in U.S. tourism; or 3) noting those Canadian firms that have the opportunity to sell U.S. assets at cycle highs and recycle that capital into undervalued Canadian assets.

But there’s another way that’s been given short shrift, in part because we can’t predicate an investment case on it. The lower exchange rate also makes Canadian firms tempting takeover targets for U.S. acquirers and other firms domiciled in countries with stronger currencies.

Although we don’t recommend firms on the basis of such windfall opportunities, many of the qualities that might attract a potential suitor are the same ones that underpin our companies’ selection as Dividend Champions.

Our focus on fundamentally superior stocks is all about the sustainability of the dividend. After all, we’re an income-oriented publication first and foremost. And when a steady dividend payer gets acquired, that means we have to go out and find another income stream to replace it. At the same time, we don’t mind the growth kicker that comes from watching one of our stocks get taken out at a premium.

To that end, The Financial Post (FP) reports a noticeable uptick in American companies poking around Canada for bargains. In addition to the discount afforded by a favorable exchange rate, U.S. firms also stand to benefit from Canada’s lower corporate tax rates, making such deals a potential twofer.

One salient example of this trend comes courtesy of Legacy Aggressive Holding Progressive Waste Solutions Ltd. (TSX: BIN, NYSE: BIN), which is set to be acquired by U.S.-based Waste Connections Inc. (NYSE: WCN) in an all-stock deal.

In what’s known as an inversion, the American firm will shift its tax domicile to Canada, thereby lowering its effective tax rate by about 13 percentage points.

On the other hand, some of the names that might be especially attractive to foreign investors, including the country’s telecoms and railway companies, would probably be a no go for a deal, since the government views these firms as strategic assets, one money manager told the FP.

A low loonie could also force Canadian firms to focus on the domestic market for acquisitions, since the strong U.S. dollar makes it much more expensive for them to pursue cross-border deals. Suncor Energy Inc.’s (TSX: SU, NYSE: SU) deal to acquire Canadian Oil Sands is probably the most prominent example of this trend.

While the number of outbound deals dwarfed inbound deals in 2015, at C$96 billion versus C$46 billion, we expect to see more capital deployed in Canada this year, and thus more windfall opportunities.