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Loonie expected to remain slightly below parity

Commodity News Service Canada / The loonie will likely remain slightly below parity with the U.S. greenback as continued global economic uncertainty will weigh on the Canadian currency, predicts currency analyst Greg Moore.

The FX Strategist with TD Securities in Toronto expects the Canadian dollar to trade around 97 cents in the second quarter and around 98 cents in the third, down from the recent level of 99-1/2 cents.

The re-emergence of the euro-zone debt crisis — notably in Spain — will add some downward pressure, as will recent soft Chinese economic data, including disappointing import numbers, he said.

Traders will also be taking cues from the U.S. economic recovery, which is far exceeding analysts’ expectations, he said. That’s been supportive for the Canadian currency, but if the revival south of the border sputters — and March job numbers weren’t good — then more pressure will be piled on the loonie, he said.

On the other hand, an increase in the Bank of Canada’s key lending rate would push the dollar up, he said.

Over the long term, Moore says the euro-zone debt crisis and any continued cooling of China’s economy are the key factors to watch.

Meanwhile, Scotia McLeod’s Andrew Pyle warned Canada’s high debt-to-income ratio could undermine the housing market, pushing the dollar downward.

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