Canadian dollar to weaken on Brexit and cheap oil: Reuters poll

Tue Jul 5, 2016 10:34am EDT
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By Anu Bararia

BENGALURU(Reuters) - The Canadian dollar will weaken over the coming months as Britain's vote to leave the European Union strengthens the U.S. dollar and with oil prices set to remain weak despite recent supply outages, a Reuters poll found.

The currency, nicknamed the loonie, has fallen 0.7 percent since Britain's decision to exit the EU on June 23 and is down 3 percent since May 3 when it hit an 11-month high of C$1.2458.

The poll of nearly 50 currency strategists showed the currency will weaken further to C$1.300 per U.S. dollar in a month, down 1.2 percent from Monday's close of C$1.2843, but not as much as was predicted last month.

The U.S. dollar will benefit from uncertainties surrounding Britain's vote to leave the European Union, said Krishen Rangasamy, senior economist at National Bank of Canada.

The loonie, which compared with other major G20 currencies has remained relatively unscathed from the fallout of Brexit, could weaken to C$1.320 in three months, versus C$1.305 expected in the June poll, before recovering back to C$1.300 in a year.

"We have not seen much of that in the first week after Brexit but we expect that to happen going forward until the end of the third quarter," Rangasamy added.

Over the past several months, the Canadian dollar has been under pressure from sluggish domestic economic growth and signs the Federal Reserve will hike U.S. interest rates this year.

But after raising rates for the first time in nearly a decade in December, markets are betting on no change in rates at all this year, according to data from the CME Group's website.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch