The Canadian dollar will remain at its current price until the end of 2013 and will return to parity with the U.S. dollar in 2014, according to CIBC World Markets.
The loonie dropped to its lowest level in two years on July 5. However, the Canadian dollar rose 0.14 of a cent to US$94.77 this morning, buoyed by a strengthening Canadian housing market.
“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,” said Avery Shenfeld, chief economist at CIBC.
Shenfeld and report co-author Andrew Grantham say the currently “soft” Canadian dollar presents an opportunity to buy.
They also reject comparisons to the Australian dollar, which fell steeply from US$1.06 in January to US$0.91 today, because:
- Australia’s economy relies more heavily on exports to China, where demand is currently slowing; and
- Australia’s top exports are commodities, while Canada ships a mix of both manufactured goods and commodities.
Shenfeld notes that with Canada’s economy closely following the fortunes of the U.S., “the Canadian dollar should be a beneficiary of better U.S. and global growth next year.”
