Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Canadian dollar seen higher if BoC front-loads rate hikes- Reuters poll

Economy Apr 07, 2022 05:35AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, January 23, 2015. REUTERS/Mark Blinch

By Fergal Smith

TORONTO (Reuters) - REUTERS POLL-CANADIAN DOLLAR TO STRENGTHEN SLIGHTLY TO 1.25/USD IN THREE MONTHS, MATCHING MARCH'S FORECAST

REUTERS POLL-CANADIAN DOLLAR SEEN UP 2% AT 1.23/USD IN ONE YEAR

Canada's dollar will strengthen over the coming year as the Bank of Canada potentially hikes interest rates aggressively but gains could be capped by the economy's dependence on the housing market, a Reuters poll showed.

The median forecast in the poll was for the Canadian dollar to edge 0.4% higher to 1.25 per U.S. dollar, or 80 U.S. cents, in three months' time, matching last month's forecast. It was then expected to climb to 1.23 in a year's time.

Should Russia-Ukraine tensions ease over the next few months "there will be both a reason for a bit more of a risk-on trade, which would be beneficial to the Canadian dollar, but also some help from the Bank of Canada, in so far as it front-loads rate hikes," said Royce Mendes, director & head of macro strategy at Desjardins.

Canada's central bank is expected to raise its overnight interest rate by half a percentage point at its next policy meeting on April 13, according to a majority of economists polled by Reuters, who also sharply raised their inflation forecasts for this year. [ECILT/CA]

The BoC has not raised rates by that magnitude since May 2000. Last month, the central bank moved by the quarter-percentage-point increment it usually favors as it hiked for the first time since October 2018.

With the Ukraine crisis driving demand for the safe-haven U.S. dollar, the loonie has not benefited as much as it normally does from surging oil prices. But that could change.

"I think there is still scope for a boost as investors digest some of the positive impact those higher commodity prices are having on the Canadian economy," said Stephen Brown, senior Canada economist at Capital Economics.

Canada is a major producer of energy products, helping to drive exports to a record high in February. Economists anticipate more gains for exports ahead.

But another key part of the economy, the housing market, has started to lose some momentum.

That could be an early sign there are limitations on how high the Bank of Canada will be prepared to lift rates in the current tightening cycle, at least compared to the Federal Reserve.

"The recovery in Canada has been so much more dependent (than the United States) on residential investment and house prices more generally and obviously those are more sensitive to interest rate hikes," Brown said.

(For other stories from the April Reuters foreign exchange poll:)

Canadian dollar seen higher if BoC front-loads rate hikes- Reuters poll
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email