Analysts at Barclays Capital think that loonie may climb even higher. In their view, Canada’s currency will show the best results among the commodity currencies such as Australian and New Zealand’s dollars as those nations more depend on China the growth of which may slow. In addition, Canadian economic growth is gaining pace and the specialists expect the bank of Canada to conduct 2 rate hikes this year.
Barclays warns, however, that later sluggish productivity growth and troubling current account deficit will come into focus. There’s also the evidence that loonie's strength is affecting exports of some goods to the United States. As a result, in the longer term USD/CAD may reverse its downtrend.
It’s also necessary to note that, according to The Economist's Big Mac Index based on the purchasing power parity Canadian dollar may be overvalued by at least 12%.
Chart. Daily USD/CAD
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