Although many market observers believe U.S. dollar bullishness will cool a bit this year, few are willing to overtly call for an outright decline in the greenback. One way of looking at that scenario is that foreign currencies and the related exchange traded funds could suffer further declines against the U.S. dollar.
The Canadian dollar the CurrencyShares Canadian Dollar Trust (NYSEArca: FXC) are already reflecting as much. After ranking as one of the worst-performing developed market currencies last year, the Canadian dollar slumped to its lowest levels in more than 12 years Tuesday, sending FXC to an all-time low in the process.
The Canadian dollar has been suffering as oil, a major export for the economy, declined to 11-year lows. However, SocGen believes that oil-related currencies could recover next year as oil prices rebound. [OPEC Tries to Give Oil ETFs Some Good Cheer]
Some observers have warned of a bubbling real estate sector, and traders have bet against Canadian real estate through shorting Canadian banks. In the meantime, the national median home price continues to climb to all-time highs. We will have to monitor how the government plans to engineer a soft landing for the real estate market in an attempt to mitigate a potential fallout. [Tepid Response by Canada ETFs to Surprise Rate Cut]
“Canada’s gross domestic product can be expected to grow about 1.5 percent in 2016, with 0.5 percent coming from exports and 1 percent from domestic demand, said Douglas Porter, chief economist at Bank of Montreal. That compares with an average forecast of 1.8 percent, according to estimates compiled by Bloomberg,” reports Allison McNeely for Bloomberg.
Persistent downward pressure in Crude Oil has continued to exert downward pressure on the Canadian Dollar. Canadian GDP came in at -.08% for the first quarter of 2015 and -.05% for the second quarter. The oil rich provinces of western Canada are seeing higher unemployment as the energy industry sheds jobs.
“The Canadian dollar will stay below 80 U.S. cents over the next two years, Caranci said. The currency hit its lowest since 2003 on Tuesday, with one U.S. dollar buying C$1.4019 and the Canadian dollar buying about 71.33 U.S. cents,” according to Bloomberg.
CurrencyShares Canadian Dollar Trust
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.