Canadian dollar won’t make it to US$ parity

Reuters

August 02, 2007

TORONTO (Reuters) - The Canadian dollar may rebound a bit in the next few months but it will fall short in its run to parity with the U.S. currency and will turn lower, according to the results of a Reuters poll of foreign-exchange strategists released on Thursday.

Since hitting a 30-year high versus the greenback last week, the Canadian dollar has been pounded by a wave of risk aversion due to worries over the state of credit markets.

In a month’s time, the Canadian unit is seen at C$1.0500 to the U.S. dollar, or 95.24 U.S. cents, according to the median estimate of 44 strategists polled from July 30 to August 2.

The currency will rise further to C$1.0430, or 95.88 U.S. cents, in three months’ time before tunning lower to C$1.0600, or 94.34 U.S. cents, in six months, and to C$1.1000, or 90.91 U.S. cents, in 12 months.

The sharp selloff of the Canadian dollar in July appears to have broken the back of this year’s rally and all but washed away forecasts that had predicted U.S. dollar parity by yearend.

“Near-term risks are for a little more Canadian dollar softness, and the medium- to long-term picture is turning a little less Canadian-dollar positive,” said Shaun Osborne, chief currency strategist at TD Securities.

“We may not see a significant selloff in the Canadian dollar at this point as domestic fundamentals remain positive, as do commodity prices. But we are unlikely to see much more significant appreciation.”

The Canadian currency was at C$1.0518, or 95.07 U.S. cents, at midafternoon on Thursday, well off the 30-year high of C$1.0337, or 96.74 U.S. cents, it reached last week.