Canadian Dollar Expected To Strengthen In 2023: Poll
Economists and currency analysts expect the Canadian dollar to strengthen in the year ahead, according to a new poll by the Reuters News Agency.
The value of the loonie vis-à-vis the U.S. dollar has declined about 8% since March 2022 as aggressive interest rate hikes by the U.S. Federal Reserve and other central banks slowed global economic growth.
However, economists now expect the global economy could avoid a recession this year as central banks come to the end of their rate hike cycle, which could provide a tailwind to the Canadian dollar.
The Bank of Canada has signalled that it will pause interest rate increases as the central bank evaluates their impact on the economy.
According to the median forecast of more than 30 currency analysts and economists surveyed by Reuters, the Canadian dollar is expected to strengthen 1.50% and reach 1.34 per U.S. dollar, or 72.63 U.S. cents, within three months' time.
The Canadian dollar is then expected to further rally to 1.30 within a year, which would be an increase of 4.60%.
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The reopening of China's economy could fuel demand for Canadian agriculture products and other commodities such as crude oil, which would be a positive for the dollar.
Still, there are some potential headwinds facing the loonie. These include a continued slump in the domestic housing market and rising levels of consumer indebtedness.
The most recent gross domestic product (GDP) data showed that Canada's economy slowed in the fourth and final quarter of 2022, registering annualized growth of only 0.2%.