C$ forecasts raised after Fed surprise, still seen weaker: poll

Thu Oct 3, 2013 1:14pm EDT
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By Leah Schnurr

TORONTO (Reuters) - The Canadian dollar is expected to lose ground against its U.S. counterpart in the coming months, though economists forecast the currency will be more resilient than previously anticipated given a less hawkish outlook for U.S. and Canadian monetary policy.

The median forecast in a survey released on Thursday of more than 50 economists and currency strategists was for the Canadian dollar to trade at C$1.030 to the U.S. dollar in one month, or 97.09 U.S. cents.

The currency traded around C$1.0337 early on Thursday.

Those polled expect the loonie will weaken to C$1.040 in the next three months, but see it then holding at that level six and 12 months from now.

That is slightly stronger than what economists had expected in September's poll, which had analysts calling for the Canadian dollar to fall to C$1.050 in six months and C$1.045 in a year.

"The fundamentals of the currency are pretty strong, so I don't see it moving too much," said John Clinkard, chief Canadian economist at Deutsche Bank Canada.

Deutsche has forecast the Canadian dollar will weaken from C$1.03 to the U.S. dollar a month from now to C$1.05 in 12 months.

The main focal point for markets in recent months has been trying to determine when the U.S. Federal Reserve will start to reduce the amount of bonds it is buying to prop up the economic recovery. The U.S. central bank is currently buying $85 billion a month of Treasuries and mortgage-backed securities.   Continued...