Flying South - the Loonie

Mar 28, 2019 | Jeremy Goldfarb


Share

Lots of questions on this one lately. Where is the dollar going? Even more than I usually get.

 

Now, purely a personal opinion before I get into some facts. We spend an inordinate amount of time (at least it feels that way given the amount I am talking about this with friends, family and clients) thinking about the USD/CAD relationship. Not that I think this is a bad thing, and considering our winters (its colder here than it is down there) it's an easy travel destination, but there are others. Anyhow....I digress.

 

I have done some digging in terms of where folks think the dollar is going, and in spite of the fact that currency predictions are extremely difficult, I will do my level best to offer opinion.

 

Our currency is almost directly correlated to oil prices, so as goes oil, so does our dollar. That said, there is also interest rates which influence the performance of our dollar as well.

 

So...oil is fine where it is, but given demand and growth, I am not expecting a remarkable increase in the price of this commodity. On the interest rate front, things have largely leveled off here in Canada (see my previous post on the yield curve for more), as they have in the US, but the delta or difference between the two countries is that the US rates are more appealing for investors. Therefore....they get more demand, and therefore....the currency gets a lift. Now, the economic data coming out of Canada "could" surprise in the short run which would push the Canadian dollar up against its counterpart, but after that, I am afraid the news is not so good.

 

So, what does all of this mean?

 

Your opportunity to buy USD may come sooner rather than later, but if we stretch this discussion out into next year, I am afraid there might be some pain ahead. Look for a range of 1.31 - 1.37 and operate accordingly.

 

click here and here for more opinion and data.