CDN dollar is right where it should be

Not dropping: just back to normal.

 

Loonie

The loonie has hit its lowest low in two years, but as far as economists are concerned, Canadians have little to fret about—unless some State-side shopping is on your to-do list.

The CAD is currently sitting at 95 cents, a change in pace from the historic heights and close parity with the American dollar the loonie has experienced in recent times.

What’s really unusual though, according to Scotia Capital chief currency strategist Camilla Sutton, is the tight range the CAD has kept in its fluctuations over the past couple of years.

“If we take a bigger step back and look at the history, the Canadian dollar has been stuck in a very unusual range for the last couple years,” said Sutton, noting that Canada has become very comfortable being within a few hundred points of parity with the USD.

“Breaking out of that is really more back to normal,” she added.

A 95 cent loonie is nothing to scoff at either, given that it’s still well above the 70-to-80 cent range seen in decades past.
The move “still left the Canadian dollar, in our view, at historically high levels—as high as what we’ve been seeing,” said Paul Ferley, assistant chief economist at RBC.

That assessment was echoed by CIBC chief economist Avery Shenfeld.

“By historic standards, or the sorts of fluctuations that other currencies experience, this has been a fairly minor move in the currency,” he said.

“A twenty cent move would be a big event. A move of five or seven cents in either direction is just business as usual.”

The shift downwards could be due to a number of factors, with the most likely culprit being comments made recently by American Federal Reserve chairman Ben Bernanke, indicating an upcoming pullback in the Fed’s economic stimulus program. Slowed growth in China has also had an impact on the commodity prices Canada’s economy heavily relies on.

The loonie is expected to continue on a slight decline over the next few months, but a sustained retreat in the Canadian currency is not expected. Economists have predicted the CAD will regain its strength moving into 2014. Desjardins senior economist Hendrix Vachon has forecast that the loonie will return to 98 cents by the end of the year.

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