for poll data
By Anu Bararia
March 2 The Canadian dollar will fall over the
coming months on expectations that the U.S. Federal Reserve will
continue raising interest rates, possibly as soon as this month,
while the Bank of Canada stays on hold until 2018, a Reuters
While the Canadian currency may gain a bit in the short
term, the survey of more than 50 foreign exchange strategists
taken over the past week showed it weakening to C$1.345 per U.S.
dollar in three months from C$1.3325 at Wednesday's close.
The widening gap between the two nations' monetary policies
has been highlighted in several Reuters polls and is
intensifying after Fed policymakers have fanned bets of a
near-term rate hike in recent days.
Record U.S. stock-market highs following President Donald
Trump's address to Congress that still offered few details on
stimulus plans sent the Canadian dollar to a five-week low
against the greenback.
"We expect the rate differentials to widen out in the (U.S.)
dollar's favor as the Bank of Canada remains on hold this year,"
said Scotiabank chief FX strategist Shaun Osborne.
Forecasters see the loonie trading around C$1.36 by
year-end, the same estimate as in February's poll. Wells Fargo,
the top forecaster in Reuters FX polls in 2016, expects the
currency to weaken slightly more than 4 percent over the coming
year to C$1.39.
"The Canadian dollar is somewhat overvalued relative to
U.S.-Canada rate differentials right now," said Wells Fargo
currency strategist Erik Nelson. "There is room for some
adjustment to the downside."
Liquidation of some long Canadian dollar positions could add
Even though respondents expect the loonie to rise marginally
in one month to C$1.325, the forecast range was wide, running
from C$1.28 to C$1.42.
Traders had increased bullish bets on the loonie to the most
since May, according to the latest Commodity Futures Trading
Commission data and Reuters calculations published last week
before the Fed ramped up its rate hike rhetoric.
The other wild card is the Trump administration's policy
approach to the U.S. dollar, which a majority of currency
strategists in a similar poll said was not clear.
On the one hand, Trump has spoken of ditching his country's
two-decade-old strong dollar policy to attract more demand from
abroad for U.S. products. On the other, he has pledged hefty
fiscal reforms that could strengthen the greenback instead.
Concerns over his stance on world trade and dollar policy
drove the U.S. currency to its worst start to a year in three
decades. But the dollar index, which measures the
greenback against a basket of six major peers, rallied on
Wednesday to its highest intraday since Jan. 11 as traders bet
on a near-term U.S. interest rate hike.
Trump's proposal of a border adjustment tax could also hurt
the loonie due to Canada's heavy reliance on exports to the
At a recent conference in Washington with Prime Minister
Justin Trudeau, Trump allayed fears about how the U.S. trade
policy might affect its northern neighbor, saying he will only
"tweak" the existing trade arrangement with Canada.
But the border tax still remains a risk.
And although the price of oil, a key Canadian export, has
doubled over the past year with major exporters reducing supply,
a rise in U.S. shale output could cap further gains and keep the
(For other stories from the FX poll:)
(Analysis by Sujith Pai; Polling by Vartika Sahu; Editing by
Ross Finley and Lisa Von Ahn)