Several economists expect the Canadian dollar to sink to as low as 70 cents US

Several economists expect the Canadian dollar to sink to as low as 70 cents US
Photo Credit: Jonathan Hayward/The Canadian Press

Loonie to dive in relation to US dollar in 2017

Share

The Canadian dollar, which is trading at around 74 cents US right now, could sink as low as 70 cents US in the first half of 2017, according to a report in The Globe and Mail.

The Toronto-based newspaper says American bank JP Morgan Chase and Canada’s Scotia Bank forecast the loonie to be around 70 to 71 cents US mark.

“We see something broadly similar to that, we’re not quite that bearish on the Canadian dollar, but on balance we think it’s more likely to weaken than strengthen in 2017,” Doug Porter chief economist and managing director of BMO Financial Group said in an interview with RCI.

(click to listen to the full interview with Doug Porter)

Listen

The BMO expects the loonie to hover in the vicinity of 72 cents US in the coming year, Porter said.

Porter cautions though that the Canadian dollar can be pushed around quite quickly depending on what oil prices do.

“If oil prices for whatever reason happen to be a lot stronger than expected over the next year, that could knock out all these forecasts right out of the ball park,” Porter said.

An American dollar story

Much of the loonie’s recent slide has been driven by the events in the United States, Porter said.

“The US dollar is rising aggressively against almost every currency in the world since the U.S. election,” Porter said. “The Canadian dollar has actually strengthened against most other currencies. Our decline has been relatively modest.”

The Mexican peso, which has weakened by about 10 per cent, is the most dramatic example of this much wider phenomenon, Porter said.

“The view is that fiscal policy or spending policy and tax policy will be quite aggressive under Mr. Trump and U.S. economy will get at least a short-term boost,” Porter said.

The U.S. Federal Reserve is expected to raise interest rates in December and a few more times in 2017, Porter said.

“Really no one else is raising interest rates, so much of this is a US dollar story,” he said.

Benefits of the lower loonie have yet to materialize
 Workers inspect vehicles and work on the assembly line at Honda of Canada Mfg. Plant 2 in Alliston, Ont., on Monday, March 30, 2015.
Workers inspect vehicles and work on the assembly line at Honda of Canada Mfg. Plant 2 in Alliston, Ont., on Monday, March 30, 2015. © PC/Nathan Denette

At the same time the Canadian manufacturing sector has yet to see major benefits of the lower Canadian dollar, Porter said.

Part of the phenomenon can be explained by the fact that the Canadian dollar has not weakened against other currencies, he said.

“Quite the opposite, we’ve actually strengthened quite a bit against the Mexican peso and we’ve basically stayed in place against some of the European currencies over the last three years, so we haven’t really gained big competitive advantage against some of our key competitors,” Porter said.

Nevertheless, some areas that are sensitive to the exchange rate such as tourism or the tech sector have benefited from the weaker Canadian dollar, he said.

Reading Trump tea leafs
Global markets will be watching very closely Donald Trump's appointments for key economic portfolios
Global markets will be watching very closely Donald Trump’s appointments for key economic portfolios © Evan Vucci/AP file photo/Nov. 9, 2016

In the coming weeks, economists will be closely watching president-elect Donald Trump’s picks for some of the key economic portfolios for any hints on his future policy, Porter said.

“We’ll be watching very carefully who he puts in place as Treasury Secretary, what exactly he does with things like NAFTA and international trade overall, and what exactly he does with taxes and infrastructure spending,” Porter said. “And I don’t think we’re going to get more complete answers on that for months to come.”

Share
Categories: Economy
Tags: , , ,

Do you want to report an error or a typo? Click here!

@*@ Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

 characters available

Note: By submitting your comments, you acknowledge that Radio Canada International has the right to reproduce, broadcast and publicize those comments or any part thereof in any manner whatsoever. Radio Canada International does not endorse any of the views posted. Your comments will be pre-moderated and published if they meet netiquette guidelines.

Netiquette »

When you express your personal opinion in an online forum, you must be as courteous as if you were speaking with someone face-to-face. Insults and personal attacks will not be tolerated. To disagree with an opinion, an idea or an event is one thing, but to show disrespect for other people is quite another. Great minds don’t always think alike—and that’s precisely what makes online dialogue so interesting and valuable.

Netiquette is the set of rules of conduct governing how you should behave when communicating via the Internet. Before you post a message to a blog or forum, it’s important to read and understand these rules. Otherwise, you may be banned from posting.

  1. RCInet.ca’s online forums are not anonymous. Users must register, and give their full name and place of residence, which are displayed alongside each of their comments. RCInet.ca reserves the right not to publish comments if there is any doubt as to the identity of their author.
  2. Assuming the identity of another person with intent to mislead or cause harm is a serious infraction that may result in the offender being banned.
  3. RCInet.ca’s online forums are open to everyone, without regard to age, ethnic origin, religion, gender or sexual orientation.
  4. Comments that are defamatory, hateful, racist, xenophobic, sexist, or that disparage an ethnic origin, religious affiliation or age group will not be published.
  5. In online speak, writing in ALL CAPS is considered yelling, and may be interpreted as aggressive behaviour, which is unpleasant for the people reading. Any message containing one or more words in all caps (except for initialisms and acronyms) will be rejected, as will any message containing one or more words in bold, italic or underlined characters.
  6. Use of vulgar, obscene or objectionable language is prohibited. Forums are public places and your comments could offend some users. People who use inappropriate language will be banned.
  7. Mutual respect is essential among users. Insulting, threatening or harassing another user is prohibited. You can express your disagreement with an idea without attacking anyone.
  8. Exchanging arguments and opposing views is a key component of healthy debate, but it should not turn into a dialogue or private discussion between two users who address each other without regard for the other participants. Messages of this type will not be posted.
  9. Radio Canada International publishes contents in five languages. The language used in the forums has to be the same as the contents we publish. The usage of other languages, with the exception of some words, is forbidden. Messages that are off-topic will not be published.
  10. Making repetitive posts disrupts the flow of discussions and will not be tolerated.
  11. Adding images or any other type of file to comments is forbidden. Including hyperlinks to other websites is allowed, as long as they comply with netiquette. Radio Canada International  is in no way responsible for the content of such sites, however.
  12. Copying and pasting text written by someone else, even if you credit the author, is unacceptable if that text makes up the majority of your comment.
  13. Posting any type of advertising or call to action, in any form, to Radio Canada International  forums is prohibited.
  14. All comments and other types of content are moderated before publication. Radio Canada International  reserves the right to refuse any comment for publication.
  15. Radio Canada International  reserves the right to close a forum at any time, without notice.
  16. Radio Canada International  reserves the right to amend this code of conduct (netiquette) at any time, without notice.
  17. By participating in its online forums, you allow Radio Canada International to publish your comments on the web for an indefinite time. This also implies that these messages will be indexed by Internet search engines.
  18. Radio Canada International has no obligation to remove your messages from the web if one day you request it. We invite you to carefully consider your comments and the consequences of their posting.

*