By Fergal Smith
TORONTO (Reuters) – The Canadian dollar will rally over coming months on a recovery in demand for riskier assets and as a solid domestic economy supports more interest rate hikes from a hawkish central bank, according to a Reuters poll.
The poll of more than 40 currency market strategists predicted the currency would climb to C$1.2850 to the greenback in three months from the C$1.3150 it was trading at on Wednesday.
The currency is expected to climb to C$1.2600 in a year, weaker than the C$1.2500 forecast in October’s poll.
The Canadian dollar declined 1.9 percent in October, its worst monthly performance since February, as optimism after a deal to revamp the North American Free Trade Agreement was overshadowed by a plunge in global stocks.
Over the same month, the U.S. dollar (DXY) climbed 2 percent against a basket of major currencies.
“The loonie is currently penalized by investors’ low risk appetite,” said Hendrix Vachon, senior economist at Desjardins. “This situation is not expected to last, as the economic fundamentals are still encouraging.”