The Bank of Canada will seek to weaken the currency to support exports as Canada's economy slows, according to Peter Kotsopoulos, one of the country's top-performing bond-fund managers.
The Canadian dollar has dropped 2.9 per cent against the U.S. dollar this year, as traders pared expectations that Bank of Canada Governor Stephen Poloz will aggressively tighten monetary policy. That said, the loonie is expected to return as much as 5.8 per cent from current levels to lag only the Mexican peso and the Swedish krona by the end of the year, forecasts compiled by Bloomberg show.
"I don't agree with the consensus forecast," Mr. Kotsopoulos, chief executive officer and director of fixed income at Toronto-based MFS Investment Management Canada Ltd., said at a panel discussion in Bloomberg's office in Toronto on Wednesday. "Poloz, who's very much a trade advocate, will orchestrate a lower Canadian dollar to help Canada's exports sector."
Kotsopoulos manages the MFS Canadian Long Term Fixed Income Fund, which returned 15 per cent in the three years to 2017, the best-performing Canadian investment-grade bond fund among 67 peers with assets of more than $500-million, according to data compiled by Bloomberg.
In addition to expectations for a slowdown in domestic growth, concerns over the future of the North American Free Trade Agreement have weighed on the loonie, along with worries over Canada's competitive position compared with a reinvigorated U.S. economy.
The currency rose 0.2 per cent to $1.2939 per the U.S. dollar at 1:14 p.m. in Toronto. It will gradually strengthen throughout the rest of the year to reach $1.24 at the end of 2018, according to forecasts compiled by Bloomberg.