TORONTO—The Canadian dollar will regain some lost ground over the coming year along with a potential recovery in the price of oil and in the global economy after it was crippled by the CCP virus pandemic, a Reuters poll showed.
The loonie, which was the top-performing G10 currency in 2019, has weakened about 8 percent since the start of the year as investors bet that Canada’s trade-dependent economy would be hit particularly hard by the pandemic, with the outlook worsened by a crash in the price of oil, one of the country’s major exports.
But economists see scope for oil to rally and for the global economy to begin to heal.
“The loonie should benefit if the global economy begins to recover in the second half of the year as we expect,” said Stephen Brown, a senior Canada economist at Capital Economics.
“While the forward curve implies that WTI will be little more than $30 in December, we think that a combination of output cuts and rising demand will push it higher to $45,” Brown said.
WTI, or West Texas Intermediate, is a U.S. benchmark grade of oil.
Trading at about 1.4140 per U.S. dollar, or 70.72 U.S. cents, on Wednesday, the Canadian dollar was expected to edge lower to 1.42 in one month. It was then seen strengthening to 1.39 in six months and to 1.36 in a year, which would be a gain of 4 percent and stronger than the 1.37 forecast in the April poll.
At Monex Europe and Monex Canada, Simon Harvey, a foreign exchange market analyst, is also banking on some recovery in oil and in the global economy to support the loonie, as well as the domestic economy showing “signs of improvement as fiscal and monetary policy works through the system.”
Ottawa is rolling out about C$300 billion of economic support measures, while the Bank of Canada has slashed interest rates to 0.25 percent, matching a record low, and begun a large-scale asset purchase program for the first time.
Incoming Bank of Canada Governor Tiff Macklem, who takes the reins on June 3, has room to make an immediate impact on monetary policy, economists say, as the central bank’s response to the virus crisis likely shifts from financial market support to boosting economic recovery.
Still, recovery could be slow, with data on Friday expected to show Canadian employment plunged by four million in April on top of the one million jobs the economy shed in March.
“We expect the loonie to struggle to trade at levels seen just prior to the pandemic as the economic scars of COVID-19 remain prominent,” Harvey said.
By Fergal Smith
Epoch Times staff contributed to this report