Canadian dollar to weaken

January 6, 2017

This is not good news. The Canadian dollar will fall even further (agains the US dollar) in 2017; due to trade agreement uncertainty and probable monetary policy divergence between the Federal Reserve and the Bank of Canada.

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The loonie rallied 3 percent in 2016 and has gained additional ground at the start of 2017, helped by recent strength in the price of oil.

But the poll of more than 40 foreign exchange strategists shows the rally is not expected to last – and economists are predicting the Canadian dollar to drop to C$1.3500 in six months and hit C$1.3600 by year-end.

“It is a story of relative central bank policy where we have the Fed hiking three times and the Bank of Canada that’s on hold,” said Eric Theoret, currency strategist at Scotiabank, who expects the loonie to weaken to C$1.4000 in six months.

Donald Trump speaks during the National Rifle Association's annual meeting in Nashville, Tennessee April 10, 2015.  REUTERS/Harrison McClary

REUTERS/Harrison McClary

Also not helping things is U.S. President-elect Donald Trump threatening to scrap NAFTA if he cannot rework it to his country’s advantage.

“I think we’ll see the Trump administration, Republicans, surprise markets with how quickly they are able to move on tax policies that are U.S. dollar favorable,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

 

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