Some experts say the Canadian dollar will continue to decline until at least the end of this year, but could bounce back in 2025.
After falling to a four-year low last week, it rose slightly on Monday to 71.18 cents. But it remains lower than it has been since the early days of the coronavirus pandemic, and is nearly 4% below September's trading level.
Catherine Judge, director and senior economist at CIBC Capital Markets, said she expects the Canadian dollar to remain around current levels for the rest of the year.
“We haven't seen levels like this for a long time, and I think we have certainly crossed an alarming level,” the judge said.
“Many factors will be involved in the coming months, and there is great uncertainty.”
The crazy sell-off comes as former President Donald Trump's re-election sent the U.S. dollar soaring, gaining momentum not only against the Canadian dollar but also against other foreign currencies.
President Trump has promised to impose significant tariffs on all imports from the United States, and about 75% of Canada's total exports go to the United States.
The judge said the Canadian dollar has room to fall further if it becomes clear that tariffs will be imposed.
“But if we can negotiate a way out of the tariffs, we'll see some recovery next year, but we'll be weak in the short term. That's really our base case.”
Weak Fool also reflects the interest rate differential between Canada and the US
Canada's economy has not performed as well in recent months as it has south of the border, and as a result, the Bank of Canada has moved faster than its U.S. counterparts to cut interest rates to avoid a recession.
Depending on President-elect Trump's actions after taking office, the difference in interest rates between the two countries could widen further.
“The general concern is that if Canada's economy is hit by tariffs and exports are very weak, the Bank of Canada will have to cut rates further to support the domestic economy,” the judge said.
“But at this point, we don't know what the tariffs will be. There is an integrated supply chain between the U.S. and Canada, so it's not in the interests of U.S. companies to impose tariffs on Canadian products. ”
Reducing torts could be a boon for Canadian businesses exporting to the United States, but it could hurt businesses that import goods and could result in higher travel costs for Canadians. be.
And while there are always winners and losers on either side of currency fluctuations, the judge said there are too few crazy people at the moment, tilting the balance too far in one direction.
