More weakness seen for Canadian dollar as greenback gains from Fed pullback: Reuters poll

Fri Aug 9, 2013 11:28am EDT
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar is expected to drop further against the U.S. dollar in the coming months and stay weaker for longer than previously forecast, a Reuters poll of economists and currency strategists showed on Friday, with a pull-back in the U.S. Federal Reserve's stimulus program boosting the greenback.

The median forecast in the survey of 45 economists and foreign exchange strategists was for the Canadian dollar to trade at C$1.04 to the U.S. dollar in one month, and at C$1.05 in three months and six months.

In a year's time, however, the Canadian currency is expected to rebound to C$1.04.

In a Reuters poll released in early July, the median forecast was for the Canadian dollar to trade at C$1.04 in one month and then strengthen to C$1.03 in three, six and 12 months.

The loonie, as Canada's currency is colloquially known, ended the North American session on Thursday at C$1.0324. It has see-sawed between C$1.02 and C$1.06 in the past two months.

Shaun Osborne, chief currency strategist at TD Securities, said his bank's view on the loonie was mostly predicated on the effect a slowdown in the Fed's asset-buying program would have on the U.S. dollar. He expects the Fed to start to pull back in September.

"We're not too far from fair value at current levels so we're not looking for the Canadian dollar to weaken off significantly," he said. "But after September, when the Fed starts to taper, we think that is going to add quite significantly to the (U.S.) dollar's value."

TD forecasts the loonie will fall to C$1.11 in a year's time, one of the survey's most negative views of the currency.   Continued...