Loonie likely to buck support from crude, close 2017 weaker

Winnipeg, May 12 – Despite the expectation for stronger crude oil prices, bearish factors are likely to weigh on the Canadian dollar, pushing the currency lower through the end of the year, one analyst says.

The Canadian dollar is expected to finish 2017 at around US71 cents. One U.S. would equal about C$1.40, according to estimates from Mark Chandler, currency strategist at RBC Dominion Securities in Toronto. Currently, the loonie is sitting near C$1.37 or US$0.73.

In America, the U.S. Federal Reserve is likely to raise interest rates another two times this year.

“And we still have the Bank of Canada on hold. Those are important factors, I think, behind the weakness,” Chandler said.

The Bank of Canada is cautious on housing market issues and U.S. trade protectionism, which means officials are likely to be reluctant to raise interest rates.

That’s expected to weigh on values, despite the expectation for crude oil prices to rise, which is typically supportive for the commodity-linked Canadian dollar.  

Chandler said crude oil prices are in a “grey area,” and he doesn’t expect the commodity to provide much support for the loonie.

“There’s a fairly wide range for crude oil prices, before it affects capital spending and GDP more directly, but we do look for slightly firmer oil prices.”

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