(June 2 – 17:50 ET) – Economists at RBC DS Global Markets are tackling the question of the doggedly weak loonie.
Yesterday BMO Nesbitt Burns Inc. was puzzling over the apparent paradox of the weak loonie in light of Canada’s strong economic fundamentals. Today RBC DS economists are arguing that there is no paradox.
Rather, they argue, currency valuation depends on relative economic performance, and although Canada has seen strong improvements in its absolute performance, relative to the U.S. it still isn’t that strong. It suggests that Canada’s generally softer monetary policy and the always-tenuous political climate continue to hamper the loonie.
RBC DS says its forecasts are calling for “moderate appreciation in the Canadian dollar” this year. It has a target of $1.41 for year end.
-James Langton