News and Updates

The latest monthly Reuters poll of currency analysts indicates that they expect the Canadian dollar to weaken by a full penny or to 1.35 per United States dollar in the next three months but to rebound and reach 1.30 per US dollar in a year’s time. The big underlying assumption is that there are no further global economic shocks, and the Canadian economy experiences a ‘soft landing.’ A soft landing refers to a situation where an economy moves from a period of high growth to a period of slower growth or stability without experiencing a severe recession or economic downturn.

Over the last week, the Canadian dollar has gone from 1.38 against the USD to its current rate of 1.3443. This is the largest one-week gain for the Loonie (CAD) since November. What is causing the Canadian dollar to strengthen against its US counterpart?

Yes, some of the gains made by the Canadian dollar have to do with general US dollar weakness, and the move away from safe-haven assets after what appears to be the end of the banking crisis.  The Canadian dollar has also benefited from higher oil prices.  But in our opinion, what’s really powering the rise of the Canadian dollar against the US dollar is a complete 180-degree turn in interest rate expectations by the Fed and, more importantly, the Bank of Canada.

The Canadian dollar reached a four-week high against the USD earlier this week, after touching 1.3572. Investors seem to be of the view that the worst-case scenario of a global banking sector meltdown is now less likely, and that the banking crisis has been contained. This has resulted in a more upbeat market outlook, led by a resurgence in technology stocks. All this has helped propel oil prices higher, which, in turn, has allowed the Canadian dollar to stabilize at these new higher levels against the US dollar. The USD/CAD is currently trading at 1.3538 (CAD/USD 0.73866).