Canadian dollar under pressure from interest rates

After several years of decline, commodity prices are on the rise. The Dow Jones Commodity Index has risen by almost 19% over the past 12 months. Canada’s main export product, oil, is up by more than 77% over the past 12 months (WTI Crude Oil), while the Dow Jones Commodity Index Copper has gone up by more than 25%.

This growth has pushed the Canadian dollar up by more than 3% against the US dollar in January 2017 alone. But in the recent days, the Canadian dollar has been under pressure due to the prospects of rising US interest rates. 

USD to CAD exchange rate in February 2017 (source: canadianforex.ca)

 

The American Federal Reserve is expected to raise interest rates twice this year, while in Canada interest rates may remain stable up until much later in the year. In fact, different representatives of the Bank of Canada have indicated that the Canadian rates may even be further reduced from the current levels. The Globe and Mail reports that analysts, polled by Reuters, expect that the Canadian dollar will further weaken from the current $1.32 relative to the U.S. dollar to $1.36 in six months. 

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