The Canadian dollar could get stronger as the economy reopens
By Erika Morris
If Canadian stocks and the price of oil rise as the economy recovers from the pandemic, the loonie should see its value increase, according to a Reuters poll.
Worth $73.64 US on July 1, the loonie could gain value in the coming year, experts say.
The Canadian dollar grew by 0.6% last week, but that was due not to domestic gain but to investors feeling a bit more confident as the outlook for global economic growth seems more positive as COVID-19 preventative measures are lifting.
Experts are predicting a 2% rise in the loonie’s value in the next year, but for that to happen, oil prices will need to rise along with investors’ appetite for risk. Markets will need to normalize to pre-pandemic levels.
S&P 500 stocks have seen a boost recently, as has the price of oil, and the 11.6% drop Canada’s GDP saw in April had little effect on the value of our dollar.
Exports saw a 6.7% improvement in May. But, many places in the United States are either slowing down or reversing reopenings due to new COVID-19 cases, which could hurt Canada’s economy.
The country sends 75% of exports, including oil, to the United States. The prices for crude oil in the U.S. have gone down by 1.2%, which leads some experts to worry that demand could stall.
Since March, the Bank of Canada has cut down the interest rate to 0.25% while kickstarting a large-scale asset purchase program to help support Canada’s market. Experts say Canada’s central bank and the US Federal Reserve will probably keep interest rates quite low for the foreseeable future almost regardless of economic data to normalize markets.
Photo: iStock/PashaIgnatov.
