As strong U.S. dollar helps push loonie to 6-year low, analyst sees possible drop to 73 cents
The Canadian dollar fell below 77 cents against the U.S. dollar on July 17, 2015. (Mark Blinch/Reuters)
The Canadian dollar dropped to below 77 cents against the U.S. dollar on Friday for the first time since March 2009.
The Canadian dollar seesawed above and below the 77-cent level all day before closing at 77 cents US when stock markets closed.
The loonie started falling on Wednesday after the Bank of Canada cut its key interest rate to 0.5 per cent. The loonie lost more than a penny against the U.S. dollar that day, its worst one-day performance this year.
“It’s a perfect storm of events that’s sinking the Canadian dollar,” Adam Button, a currency analyst with ForexLive.com, told CBC News in an interview. He cited the collapse in oil prices that began last summer and the soaring value of the U.S. dollar.
“Almost at the exact same time as the Bank of Canada cut [rates], the Federal Reserve was talking about hiking rates,” added Button. “The U.S. and Canadian economies are wildly diverging at the moment.”
The Canadian dollar could plunge even lower, Button warned. He sees the loonie “on the brink of an 11-year low,” falling as low as 73 cents against the U.S. dollar in the next month.
U.S. economic momentum
Rising inflation in the U.S. helped boost the U.S. dollar at the loonie’s expense today, Karl Schamotta, director of foreign exchange research and strategy with Cambridge Global Payments, told CBC News.
“We see increasing signs of momentum in the American economy, and that’s likely to push the Federal Open Markets Committee toward [an interest rate hike] in the early part of the fall,” said Schamotta.
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