2019 was an unusually quiet and stable year for the Canadian dollar. 2020 has been anything but. Canada’s currency was worth 77 US cents at the start of the year but lost 10% of its value in recent weeks, dropping to a four year low of just 69 cents before recovering slightly in the past few days. Broad strengthening in the US dollar has been a factor\u2014the greenback was at times up more than 9% against all currencies (on a trade-weighted basis) and about 7.5% higher compared with advanced economies. Among the latter, Canada is joined by other commodity producers (Australia, Norway) and countries launching new quantitative easing programs (New Zealand, Australia again) in seeing double-digit declines in their currencies.<\/p>\n
That the Canadian dollar has weakened in an environment of significant risk aversion, collapsing energy prices, and general demand for US dollars is unsurprising. Given continued uncertainty over the depth and duration of coronavirus containment measures, it’s too early to say whether risk appetite or oil prices have hit bottom. New easing announced by the Bank of Canada\u2014it cut the overnight rate to its effective lower bound and launched its first QE program on March 27<\/a>\u2014could also send the currency lower as markets continue to digest those moves. But we don’t think the Canadian dollar is headed for its all-time low of 62 US cents seen in the early-2000s.<\/p>\n
\n