Loonie Fighting Downward Trend
The Canadian dollar is bucking the trend most economists had predicted, so far.
Most money experts have the loonie trading in the mid to low $0.80 cents U.S. mark by the end of the year. But after falling below $0.89 cents U.S. in March, the dollar has climbed above the $0.92 cent mark.
Former University of Windsor economist Mark Meldrum says there’s a key reason for the rebound. “Our last read on inflation didn’t come in lower than expected, it came in as expected,” says Meldrum. “So inflation has been inching up, not jumping, but inching up. So if the Bank of Canada decides in two or three more months that inflation is starting to be a problem, and they raise interest rates, well then that’s new information.” If nothing changes Meldrum still expects the dollar to close the year around $0.85 cents U.S.
But he says if interest rates go up or the Keystone XL pipeline gets approved all bets are off the table on how how high the dollar will rise. Also factors in the dollars slow climb since March, the real estate market hasn’t buckled, and Canadian banks are still in good financial shape.