Loonie to benefit from better U.S. and global growth next year
TORONTO, July 8, 2013 /CNW/ - The Canadian dollar will not suffer the fate of the Australia currency and will hold near current levels through 2013 while seeing a rebound to parity by the end of next year, finds a new report from CIBC World Markets Inc.
"As we expected, the Canadian dollar has been a casualty of disappointing global growth this year, moving even earlier than we forecast to our target of five cents weaker than parity," says Avery Shenfeld, Chief Economist at CIBC. "But that now has some momentum-style forecasters piling on even more damage ahead. Instead, while normal volatility will no doubt see days with the Canadian dollar a cent or two weaker than today's levels, we view the bout of Canadian dollar softness this year as an opportunity to buy it ahead of a likely appreciation in 2014."
Unlike a number of forecasters, Mr. Shenfeld does not believe the loonie will suffer the same drop as the Australian dollar. "The deeper dive suffered by the Australian dollar, from US$1.06 in mid-January to 0.91 today, is oft cited as foretelling the Canadian currency's fate, as the two are seen as twins by many traders."Analogies to the Australian dollar's steeper setback are overdone, as the currencies are more like distant cousins than twins in terms of the economic fundamentals. While both are in the so-called "dollar bloc" (an empty phrase in our view based only on the name of the currency), and both countries are developed, commodity exporting nations with historical ties to the UK, on other key fundamentals, the gaps are as wide as their geographic separation."
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