Skip to main content

The Globe and Mail

Why the Canadian dollar may have another few cents to fall

These are stories Report on Business followed this week.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

I remember eyebrows being raised - notably mine - when some economists began last spring to predict a 90-cent Canadian dollar, albeit with different timelines.

Story continues below advertisement

And then sitting up and taking notice in late November when Goldman Sachs Group Inc. recommended shorting the loonie and forecast a plunge to 88 cents.

Now, some see it sinking as low as about 85 cents, and sooner rather later.

The loonie, as Canada's dollar coin is known, gained some ground Friday to hover below 91 cents, having bounced around, and generally down, over the past while.

There are various factors behind the plunge in the dollar. But spurring on its decline are softer economic readings and a central bank that's in no hurry to raise interest rates.

The currency has come a long way in a short time from the days of parity, and according to the latest forecasts there are a few cents yet to go.

Senior currency strategist Greg Moore at Royal Bank of Canada, for example, projected Friday that the loonie will slip below 87 cents by the end of this year, and below 85 cents by late 2015.

"Over the longer-term, CAD continues to face headwinds that point to trend under-performance against the majors," he said, referring to the currency by its symbol.

Story continues below advertisement

"Canada still faces a notable current account deficit ... that has been persistent since 2009," Mr. Moore added in a report.

"Heavy foreign capital inflows for most of that five-year period offset the sizeable external deficit and kept CAD well-supported. Those capital inflows have rapidly erased over the last year, however ... and the result is a basic balance that is back in deficit for the first time since the late 1990s."

Economists at Toronto-Dominion Bank also see a dollar as low as the 85-cent level, though by mid-2014, before picking up again.

"Canada's economy is forecast to underperform the United States, interest rate hikes remain quite a ways off and the outlook for commodity prices is pretty flat, on average," they said.

The week's top news
Partners at Heenan Blaikie voted Wednesday to dissolve the storied Canadian law firm, home to several political heavyweights, after an exodus of lawyers.

Twitter Inc. disappointed investors with its first earnings report since going public, raising concerns about slowing growth in its user base.

Story continues below advertisement

Big Canadian companies are leaping ahead of their U.S. and British peers in adding more women to their corporate boards, a Spencer Stuart study finds.

Sobeys Inc.'s demand for supplier price cuts is prompting other retailers to follow, threatening to squeeze vendors already hurt by a weaker dollar.

Microsoft Corp. named Satya Nadella to replace Steve Ballmer as chief executive officer after a five-month search.

North American vehicle production hit its highest level in s a decade last  year, but Canada missed out on the recovery, new numbers show.

Ottawa will start sharing vast amounts of financial data about Americans living in Canada with U.S. tax authorities, paving the way for a full U.S. crackdown.

A jury took just three days to reach a verdict on the biggest illegal insider trading scheme brought before a courtroom: Guilty.

Required reading
Stubbornly low inflation has been an issue in Canada for the past year. Tavia Grant looks at what why.

SodaStream International Ltd. shareholders are looking for less controversy and more profit to prevent the stock from going flat. Brenda Bouw looks at the company.

Rita Trichur looks at how customer service is emerging as the new battleground in the wireless sector.

Cereal sales in North America have been steadily declining for years amid rushed breakfasts and healthier choices, hitting the sales of producers. Eric Atkins reports.

The week in Business Briefing

The week in Streetwise (for subscribers)

The week in Economy Lab

The week in ROB Insight (for subscribers)

Report an error Licensing Options
About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at