Analysts differ broadly on the future for the Canadian dollar

The Canadian dollar has been quite volatile recently: since May 2017, it appreciated by almost 14% relative to the US dollar and has since been fluctuating in a 1%-2% range.  

Lately, Canadian analysts have produced a multitude of forecasts for the Canadian dollar.

The forecasts see the Canadian dollar between US$0.75 (Capital Economics) and US$0.87 (Scotiabank), by the end of 2018. This indicates that there is no consensus on the dollar’s direction given the Canadian dollar’s current rate of about US$0.82.

Those who expect that the Canadian dollar will depreciate, see the recent strength in the Canadian economy as temporary and believe that there will not be enough evidence to support the Bank of Canada further raising interest rates. Scotiabank’s forecast for a strengthening Canadian dollar, on the contrary, is based on the view that the Canadian economy has turned the corner and that the Bank of Canada will be forced to continue raising interest rates.

The wide variety of forecasts demonstrates just how complex exchange rate forecasting is. The history of investment shows a lot of examples of individual investors getting badly burnt while trying to speculate on exchange rates.

Ukrainian Credit Union Limited