By Ketki Saxena
Investing.com -- The Canadian dollar gained against its US counterpart as the loonie was supported by a rebound in commodities, while the US dollar retreated as investors pared back rate hike bets ahead of tomorrow’s jobs data.
However, the pair remains around the 1.3000 level, and the US dollar index remains at a 20 decade high against a basket of currencies.
A Reuters poll also shows that the Canadian dollar is expected to gain less in the coming year than previously thought, as the growing risk of a global economic slowdown bolsters demand for the safe-havens U.S. dollar.
The median forecast in the poll was for the Canadian currency to strengthen 1.6% to 1.28 per U.S. dollar, or 78.13 U.S. cents, in three months’ time, compared to 1.26 in last month’s forecast. It was then expected to climb to 1.25 in a year’s time, compared with the previous forecast of 1.23.
The loonie meanwhile has been pressured by global risk-off sentiment, sliding oil prices, and slowing economic growth in Canada - which is now widely expected to tip into a recession as the Canadian central bank remains committed to an aggressive path of policy tightening.
The loonie has also been pressured by a plunge in the price of oil, one of Canada’s major exports, which in recent weeks has fallen over $25 to trade below $100/barrel.
With 75% of Canadian exports going to the United States, the risk of a recession south of the border also poses headwinds for the loonie,
Erik Nelson, currency strategist at Wells Fargo (NYSE:WFC) notes that "Risks are tilted toward declines in the Canadian dollar if a U.S. recession happens sooner and oil prices continue to collapse.”