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Canadian dollars.JONATHAN HAYWARD/The Canadian Press

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.

"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.

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