Loonie in for more near-term pain: experts

The loonie is now down nearly 17 per cent against the greenback for 2015, the biggest drop since 2008, when it lost 18.6 per cent against the U.S. dollar due to a collapse in commodity prices.

With nine trading days left in the year, analysts say the record could be tested as a monetary policy divergence between the U.S. Federal Reserve and Bank of Canada pressures the loonie.

“The Canadian dollar is expected to rise in second half of 2016, but the currency could be in for more pain in the near term as markets continue to speculate whether the Bank of Canada could cut rates one more time before an expected rate increase in the second half of next year,” said RBC economists in a note to clients.

The Canadian dollar added 0.03 of a U.S. cent to 71.71 cents US Friday, a day after slipping below 72 cents US for the first time since May 2004.

Disappointing economic data on Friday continues a string of worse-than-expected readings, adding to the pressures the loonie has faced. Oil prices, another driver of the dollar, have fallen to levels not seen since 2008.

In the past, a low Canadian dollar has been a boon for Canada’s manufacturing industry.

“Due to strong competition from other countries, Canadian manufacturing still isn’t the positive many were hoping for and will probably be a negative for October GDP next week,” said Andrew Grantham and Royce Mendes, economists at CIBC World Markets.

Consensus currently sees a rate hike at the end of 2016, which economists say will allow the loonie to finally start gaining ground against the U.S. dollar.