Evan Brown, a currency strategist at Morgan Stanley, also argues that Canada’s energy sector, the largest export industry in the country, could see problems ahead. While the Keystone XL pipeline is stuck in limbo due to environmental concerns, Canada’s energy companies are facing increased competition from the U.S., namely from a shale oil boom. [Canadian Seen as a Vulnerable Developed Market Currency]
“Canada has to lean on something for growth and that something is going to be what they have relied upon” in the past, “which is commodity exports,” Brown said in the article. “If the oil-export receipts — the income from oil exports — is disappointing, that’s where you get the most bearish scenario for Canada.”
Brown warns that the loonie could depreciate to as low as C$1.3 per USD by next year if the pipeline problems remain unresolved, consumer demand dips and manufacturing falters.
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For more information on the loonie, visit our Canadian dollar category.
Max Chen contributed to this article.