An Ontario-based money manager says the Canadian dollar could rise to 80 cents US if the Federal Reserve cuts interest rates again and the Bank of Canada stands pat.
“I think we could get to 80 cents US. 80 cents is not impossible for the currency,” Andrew Pyle, senior wealth advisor and portfolio manager with ScotiaMcLeod, the investment arm of the Bank of Nova Scotia, told BNN Bloomberg’s Paul Bagnell Tuesday. Pyle’s comments were made a day before the Bank of Canada’s next interest rate decesion.
“But it does require that dynamic of having another rate cut by the Fed and having no change in the [Bank of Canada] rate.”
The U.S. Fed cut rates three times in 2019 and has signalled it would remain on the sidelines over the coming year ahead of the upcoming U.S. presidential election in November. Meanwhile, the Bank of Canada has held rates steady at 1.75 per cent since October 2018 and is widely expected to remain on hold at its next meeting on Wednesday.
“We have seen an improvement in the value of the Canadian dollar over the last several months. We not have yet seen it get up to 80 cents US,” Pyle said.
“However, if the Federal Reserve were to cut rates, that would put significant upward pressure on the Canadian dollar which might not be what the Bank of Canada wants at this point.”
Pyle added other factors like the price of oil would also come into play and warned the Bank of Canada would have to be careful if the loonie does march higher.
“The last thing you want is an overvalued currency midway through 2020 with an economy that may already be slowing down.”
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