Loonie down amid market turmoil
Experts say currency has not much further to fall
The plunge in global stock markets over the past week has dragged down the Canadian dollar and oil prices, but some market observers see signs the loonie’s fortunes will change this year even as the Canadian dollar continued its slide Monday.
The loonie is down slightly in the opening months of the year as the global stock market rout that started at the beginning of February has investors turn to safe-haven assets like the U.S. dollar and the Japanese yen.
After climbing from 79.71 cents US at the outset of 2018 to as high as 81.38 cents US on Feb. 1, the loonie reversed course at the end of last week. As of Monday morning, it was down to 79.40 cents US.
The Canadian dollar tends to move on several types of data — particularly commodity prices — which have also seen their fortunes reverse during the heightened levels of volatility in the marketplace. When oil prices fall, the loonie typically follows suit, especially against the greenback.
The C.D. Howe Institute says the Canadian economy is particularly open and, because of its reliance on commodity exports, vulnerable to shocks from abroad.
The Canadian dollar’s response during recent tumult is consistent with past periods of volatility, said Mark Mccormick, North American head of FX strategy for TD Securities.
He forecasts the loonie will bottom out at about 79 cents US and settle into a range of 80 to 81 cents US within the next couple of months.
The tumult that saw global equity markets begin to fall at the beginning of February was triggered by U.S. jobs data that showed wages grew more than anticipated, raising worries that signs of higher inflation might push the U.S. Federal Reserve to increase interest rates more quickly.