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TORONTO The plunge in global stock markets over the past week has dragged down the Canadian dollar and oil prices, but some market observers see signs the loonie fortunes will change this year even as the Canadian dollar continued its slide Monday. dollar and the Japanese yen.

After climbing from 79.71 cents US at the outset of 2018 to as high as 81.38 cents US on Feb. 1, the loonie reversed course at the end of last week. As of Monday morning, the loonie was down to 79.40 cents US.

The Canadian dollar tends to move on several types of data particularly commodity prices which have also seen their fortunes reverse during the heightened levels of volatility in the marketplace. dollars. Howe Institute says the Canadian economy is particularly open and, because of its reliance on commodity exports, vulnerable to shocks from abroad.

The Canadian dollar response during recent tumult is consistent with past periods of volatility, said Mark McCormick, North American head of FX strategy for TD Securities.

He forecasts the loonie will bottom out at about 79 cents US and settle into a range of 80 to 81 cents US within the next couple of months. investors also tend to bring their money home, he said.

The Canadian dollar is also influenced by the Bank of Canada. The currency soared last year after the central bank surprised the markets and raised interest rates twice in the third quarter. However,
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policymakers subsequently tempered their hawkish tone, emphasizing that the bank will proceed cautiously in order to gauge the impact of higher borrowing costs and a stronger loonie on the economy. and Canadians vacationing south of the border, a weaker loonie makes it easier for Canadian businesses to export products and bolsters our own tourism industry.

Sometimes larger macroeconomics trends can affect the loonie an unanticipated rise in employment, for example typically means a rise in the Canadian dollar.

of this has really triggered a spike in volatility because it brought into question whether higher interest rates are going to curtail the global growth story or erode corporate profitability, said Candice Bangsund, a portfolio manager of global asset allocation at Fiera Capital in Montreal.

The VIX index Wall Street so called gauge because it measures how much volatility investors expect in the future had spiked above 50 early Tuesday, quadruple where it was about two weeks ago, before settling at 25 late Wednesday and them ramping up to 34 by late Thursday. By Monday morning it was hovering above 27.

Despite the nervousness in the market, Bangsund said her firm believes there is strong support for the Canadian dollar right now and has increased her 12 month target for the loonie to 85 cents US from 82 cents US.
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