Canadian dollar may go low in 2017

Canadians travelling to the United States or buying goods south of the border in 2017 could expect to pay more as the Canadian dollar is expected to retreat, with some economists saying the loonie could swing as low as 70 cents US.

According to several recently released forecasts, the Canadian dollar is expected to fall against the backdrop of several factors: a U.S. economy gaining speed, interest rate hikes by the U.S. Federal Reserve, and oil prices that are projected to remain soft.

The loonie stood at 74.10 cents US at the close of trading on Wednesday after slipping 0.23 of a cent.
Scotiabank said it sees the loonie dipping to 71 cents in the second quarter of next year before returning to its current level of 74 cents by the end of the year.

CIBC is projecting the dollar to slip to about 72 cents in the first quarter of 2017 before ending the year with a recovery of about one cent, while JPMorgan Chase predicts a 70-cent loonie by the middle of next year, then to remain between 70 and 71 cents in the latter half of the year.

Economists at Desjardins are forecasting the loonie to end 2016 at 73 cents US, and then slide to 70 cents US by the end of next year, with the election of Donald Trump as the next U.S. president playing a major role in the dip.

“Everything seems to be in place for a long climb by the greenback,” Desjardins said in a release. “The U.S. economy’s acceleration and monetary policy divergence will be its main support.”

Trump’s stated plans to cut taxes and ramp up infrastructure spending is expected to boost the U.S. economy, and the Federal Reserve is expected to boost U.S. interest rates, which could draw investors toward the U.S. greenback.

Desjardins did caution that there is a lot of uncertainty surrounding the outlook for the loonie, however, “as the future U.S. administration’s exact game plan is not known.”

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