|
The poll of more than 40 currency market strategists predicted
the currency would climb to C$1.2850 to the greenback in three
months from the C$1.3150 it was trading at on Wednesday.
The currency is expected to climb to C$1.2600 in a year, weaker
than the C$1.2500 forecast in October's poll.
The Canadian dollar declined 1.9 percent in October, its worst
monthly performance since February, as optimism after a deal to
revamp the North American Free Trade Agreement was overshadowed
by a plunge in global stocks.
Over the same month, the U.S. dollar <.DXY> climbed 2 percent
against a basket of major currencies.
"The loonie is currently penalized by investors' low risk
appetite," said Hendrix Vachon, senior economist at Desjardins.
"This situation is not expected to last, as the economic
fundamentals are still encouraging."
Global equities have been pressured by a trade war between the
world's two largest economies, the United States and China.
Canada runs a current account deficit and is a major exporter of
commodities, including oil, so its economy could be hurt if the
global flow of trade or capital slows.
In October, oil prices posted the worst monthly performance
since mid-2016 amid worries about the outlook for demand and
evidence of rising global crude supply.
To make matters worse for Canada, the price of its heavy crude
traded at a record discount to U.S. oil during the month due to
pipeline congestion. The differential slumped to more than $50
before recovering some ground, according to Shorcan Energy
Brokers.
Still, the Bank of Canada was encouraged enough last week by
prospects for the economy to lift its key interest rate to 1.75
percent. It said the rate would need to rise further to a
neutral stance of about 3 percent to achieve its inflation
target, and opened the door to a faster pace of tightening.
Economists in a separate Reuters poll this week expected the
central bank to raise interest rates three times next year.
The Canadian dollar should attract support from a "fairly
hawkish Bank of Canada," said Erik Nelson, a currency strategist
at Wells Fargo. "Canadian growth remains above potential, driven
by solid domestic demand, while the resolution of NAFTA
uncertainty should help rebalance the economy toward investment
rather than consumer spending."
Canada's economy will continue to grow faster than its potential
over the coming quarters as U.S. fiscal stimulus boosts demand
for its exports, a Reuters poll of economists showed last month.
Still, Canada's productivity and credit growth face a threat
from a flattening yield curve as it makes it less appealing to
invest in long-term projects, and less still if the Bank of
Canada meets its goal of a 3 percent interest rate.
(Other stories from the global foreign exchange
poll:(nL3N1XB3NZ))
(Reporting by Fergal Smith; Polling by Manjul Paul and Sujith
Pai in Bengaluru, editing by John Stonestreet)
[© 2018 Thomson Reuters. All rights
reserved.] Copyright 2018 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
 |
|
