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Canadian dollar: Friday outlook

H.S. Borji
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Canadian dollar: Friday outlook

The Canadian dollar fell to a fresh four-and-a-half year low against the greenback, as bearish sentiment continued to surround the loonie on the heels of the Federal Reserve’s latest decision.

The loonie, which was hit early and often this week, continued to slide Thursday, as forex traders continued to bid up the US dollar following the Fed’s decision to pare asset purchases by another $10 billion. Bank of Canada Governor Stephen Poloz set the most recent slide in motion earlier this week when he said slow economic growth could become the new norm for Canada.

The Canadian dollar will have two more hurdles to cross before heading into the weekend. Statistics Canada on Friday will report on consumer inflation and retail sales, two market-moving releases that could impact the loonie.

At this stage, the loonie’s chances of making up any serious ground against its southern adversary are limited. Consumer price inflation is expected to rise 0.9 percent annually in February to remain well below the central bank’s 2 percent target. The Bank of Canada’s so-called core measure is expected to read 1.1 percent. Retail sales, meanwhile, are expected to rise 0.7 percent in January following a decline of 1.8 percent. The impact of this advance, however, is expected to be limited.

The Canadian dollar was trading below 89 US cents as of Thursday’s noon session, the lowest level since July 2009. The USDCAD currency pair is trading at 1.1249, up 0.1 percent from the previous close.

Long-term, forex traders may have reason to expect a stronger Canadian dollar. According to the Canadian Imperial Bank of Commerce (CIBC), an analysis of Canadian fundamentals has the loonie trading at around 93 US cents by the end of the year. The Canadian government announced similar forecasts in its latest budget, saying the loonie is expected to rise to 95 cents in 2015.

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