Canadian Dollar Set to Fall?

Posted by Rob

August 4, 2008

Bank of Canada In 2007, the Canadian dollar reached parity with the US dollar, marking a significant point after 30 years of trading lower against the USD.

The Canadian dollar has also seen strength due to the countries high value commodities, including large oil reserves, copper and lumber - however now many experts are predicting a fall of up to 17% through 2009.

According to Steve Butler of Scotia Capital Inc. in Toronto, “the way energy prices and certain commodities have boomed, many thought we would weather the downturn better. You’ve got a pessimistic look at the economy by the market. It’s forced a lot of people to rethink that view.” - Bloomberg

Many experts feel the Canadian dollar is overvalued at present prices and feel that both the fundamentals and technicals indicate a weakened Canadian dollar. Recent statistics have shown that the Canadian economy dropped by 0.1% in May. A slowdown in car production and gas extraction saw the economy shrink for May.

Meanwhile the US dollar traded near a one-month high against the euro in expectation of the Federal Reserve meeting tomorrow. It is expected that the US benchmark rate will remain at 2%.

In the UK, GBP fell after poor construction index figures. A construction industry report showed that the the sector last month at the fastest pace in 11 years.
Earlier in July, one of the largest UK construction companies, Persimmon announced 4500 job losses, highlighting the tough business conditions for the UK construction industry. Certain sectors within the UK jobs sector look to continue to struggle through the difficult economic conditions, however, there are still areas of growth for job seekers.

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