Currency, more than commodities, may ultimately determine if the Canadian economy gets its groove back, according to Russell Investments’ Third Quarter 2015 Strategists’ Outlook published on Tuesday.

“We believe that currency will play a pivotal role in the prospects of the Canadian economy over the next decade, explained Shailesh Kshatriya, director, Canadian strategies at Toronto-based Russell Investments Canada Ltd., who authored the Canada Market Perspective section of the global report.

“Our view is that the Canadian dollar needs to remain low for longer in order to regain competitiveness against the U.S.,” said Kshatriya, “And more importantly, relative to an increasing imposing manufacturing capacity in Mexico, the loonie needs to be more attractively priced for multinational firms.”

The report also notes that the strength of commodity markets in the early 2000s — the oil market in particular — was a boon that came at the cost of lost competitiveness. The negative impact of this was most acute for domestic manufacturers, who saw a strengthening Canadian dollar contributing to a 30% increase in labour costs, while they have remained roughly flat in the U.S.

According to the report, regaining lost manufacturing capacity will not happen overnight. A pre-requisite for bringing greater balance to the domestic economy and tilting reliance away from resources requires the visibility of a weaker Canadian dollar relative to the U.S. dollar for an extended period. “For this reason, we believe the Bank of Canada will be diligent with interest rate moves going forward,” added Kshatriya.

Russell Investments’ strategists also believe that the Bank of Canada’s base case of 1.9% 2015 GDP growth is potentially as good as it can get, and have downgraded their growth prospects for the Canadian economy to 1.5%-1.9% (previously 1.8%-2.1%).