The worst may be over for the Canadian dollar. According to Fidelity fund manager David Wolf, the CAD to USD exchange rate could be nearing a bottom.
“We’re closer to the end than the beginning of the depreciation,” Wolf told Bloomberg News in an interview. It may be, however, a long time before that capacity starts to be rebuilt, he added. (Source: “Fidelity’s $40 Billion Money Manager Says Worst Over for Loonie,” Bloomberg, February 22, 2016.)
Wolf said that even if the currency is falling, Canadians should be prepared for it to stay weak for an extended period, even if some of the nation’s equities and other financial markets start to rally in advance.
The Canadian dollar is rebounding from its lowest levels in 13 years, reached last month in a climax to the longest, deepest depreciation in its history. It was trading at CA$1.37 (US$0.73) on Monday.
The free-fall in oil prices—from $114.00 per barrel in mid-2014 to $26.00 per barrel last month—drove the currency’s plunge.
Meanwhile, hedge funds and other large speculators are paring their bets on further losses, Bloomberg reported.
Wolf is starting to put on hedges protecting against Canadian dollar strength on the overseas investments that he manages for local clients. (Source: Ibid.)
“We’re perhaps just at the outset of a time where we’re going to need a relatively cheap Canadian dollar,” Wolf said.
Canada, the world’s 11th-largest economy, is counting on a weaker loonie to transition away from its dependency on commodity exports to a more manufacturing-based economy.