Loonie forecast to hold its own against U.S. greenback

The loonie will likely continue to weaken against the U.S. dollar, but should stay close to parity in medium to longer term, says ScotiaBank’s chief currency strategist.

“The path of least resistance for the Canadian dollar in the near term is weaker,” said Camilla Sutton.

However, lower global growth along with the less hawkish stance by the Bank of Canada will push the dollar lower in the short term.

“There is a possibility of the Canadian dollar moving to around the 96 U.S. cent mark in the current time period,” Sutton said.

The Bank of Canada is forecasting for lower growth here — although it expects the same for the U.S. and China, she noted.

“The Canadian unit will definitely be pulled in both directions, but ultimately the currency should be able to hold around parity with the U.S. unit heading into the third and fourth quarters,” she said.

The stability of the Canadian government is attractive, while the U.S. political scene is actually quite challenging at this time, she said. An easing of the euro-zone crisis is also favourable for the loonie, Sutton said.

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