The Canadian dollar rose above 78 US cents in early-December, hitting its highest level in two and a half years. That represents an increase of about 9 cents from its March low. Nonetheless, loonie’s recovery is losing momentum and though economists at RBC Economics expect the Cadandian dollar to stay robust in the first half of 2021, the USD/CAD pair is set to recover toward end-2021.
Key quotes
“A partial recovery in WTI and stronger pickup in other commodity prices has helped the Canadian dollar, but it’s a broadly weaker US dollar that is really flattering the loonie. Excluding USD, the Canadian dollar is actually down since the start of the year on a trade weighted basis.”
“With the US likely to lead the recovery among developed economies next year, we don’t see the US dollar continuing to lose ground. The Canadian dollar is expected to hold onto its recent gains over the first half of next year before drifting lower toward the end of 2021 and into 2022 as markets begin to contemplate rate hikes by the Fed.”
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