Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Canadian dollars. (JONATHAN HAYWARD/THE CANADIAN PRESS)
Canadian dollars. (JONATHAN HAYWARD/THE CANADIAN PRESS)

Canadian dollar to sink to 90 cents by 2014: TD Add to ...

Another major bank is forecasting a big drop in the Canadian dollar.

Toronto-Dominion Bank says the loonie, now at near par, will tumble to 90 cents by early next year, before recovering to 93 cents by the end of 2014.

The bank blames the loss of Canada’s “growth advantage,” lower commodity prices and the rebounding might of the U.S. dollar for the reversal.

More Related to this Story

“A host of factors should weigh on the Canadian dollar – though in truth, even at 90 cents, the loonie is still strong,” TD economists Craig Alexander and Francis Fong said Thursday in a research note.

TD puts the “fair value” estimate of the dollar at anywhere from the high 70-cent range to the low 90s.

TD says Stephen Poloz’s appointment as Bank of Canada governor is not part of the story that will drag the loonie lower. Mr. Alexander and Mr. Fong said they expect a “continuity of monetary policy” under Mr. Poloz, who takes over from Mark Carney June 1.

“The bank does not manage policy to target the exchange rate, and Mr. Poloz would not have been offered the job if he was not an inflation fighter,” TD said. “Our change in the Canadian dollar outlook has nothing to do with the change in leadership at the Bank of Canada.”

A weaker dollar could, however, make Mr. Poloz ’s job easier. It’s like a stealth rate cut – easing the pain on exporters and manufacturers, without encouraging already heavily indebted Canadians to borrow more.

So the net effect could lift the Canadian economy, inject a bit of inflation from higher prices for imported goods, and perhaps accelerate the eventual timetable for raising the bank’s target for the overnight rate, now at a rock-bottom 1 per cent.

TD joins a growing number of analysts predicting that the Canadian dollar’s long run of strength, which began in 2003, is coming to an end.

Instead, the report points to harder evidence: An economy that is expected to grow more slowly than the U.S. this year and next, lower prices for oil, base metals and precious metals, and a further rise of 4 to 5 per cent in the trade-weighted value of the U.S. dollar.

Follow on Twitter: @barriemckenna

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories