Shaun Osborne says loonie may end 2024 at 72 cents US as weak greenback disrupts usual patterns
The Canadian dollar may strengthen slightly in the short term and could finish the year trading near 72 cents US, according to Shaun Osborne, managing director and chief FX strategist at Scotiabank.
Osborne shared his outlook in an interview with BNN Bloomberg, saying the loonie was trading around 73 cents US on Friday afternoon and is already near the year-end target.
“We are looking for end of year forecast of 72 cents for the Canadian dollar,” Osborne said. He added that the loonie may gain more ground in the short term due to general US dollar softness.
Osborne noted that markets are in an “unusual situation,” citing broad weakness in US assets including equities, bonds, and the greenback.
“That’s kind of unusual for markets generally,” he said, referring to the recent currency movement. He explained that when equity markets weaken, the US dollar usually strengthens as a safe haven asset.
He pointed out that the recent trend could significantly impact Canadian investors with US dollar-denominated portfolios.
“We’re not seeing that right now. The Canadian dollar is actually strengthening,” he said.
He noted that this trend can amplify losses for Canadian investors in US stock portfolios if they are not hedged for FX risk.
Osborne said there has been “a pretty big shift in market sentiment regarding the dollar outlook over the last little while.”
He added that the Canadian dollar appears to be moving into a higher short-term range, possibly between 72 to 74 cents.
He explained that periods of US dollar underperformance have historically been tied to structural issues such as deficits.
“So big deficits usually worry investors and that has in the 80s and particularly in the early 2000s, twin deficit story was a big driver of dollar weakness,” Osborne said.
