Home ForexArticles Canadian dollar rises, but gains limited by mortgage adjustments By Reuters

Canadian dollar rises, but gains limited by mortgage adjustments By Reuters

by SuperiorInvest

© Reuters. FILE PHOTO: Bank of Canada Governor Mark Carney holds the new Canadian $50 bill, made of polymer, in front of the CCGS Amundsen, the Arctic research vessel depicted on the back of the new bill, in the city of Quebec, March 26, 2012. REUTERS/Mathieu Bélange

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar will strengthen over the next year if the U.S. Federal Reserve cuts interest rates as expected, but its gains could remain in check as mortgage renewals weigh on household spending. and economic growth, a Reuters poll found. .

The median forecast of 40 currency analysts surveyed in the Feb. 1-6 survey was that the dollar would strengthen 0.7% to 1.34 per U.S. dollar, or 74.63 U.S. cents, in three months, matching the January survey forecast.

It was then predicted to advance to 1.30 within a year, also matching the previous month’s forecast.

The expected strengthening comes as some analysts predict widespread declines in the US dollar.

“We see the dollar weakening in 2024 as US economic growth slows to a pace more in line with the rest of the world and the Federal Reserve begins to cut rates,” said Jayati Bharadwaj, global currency strategist. from TD Securities, adding that markets could then focus on the growth boost coming from “global easing cycles.”

Canada is a major producer of raw materials, including oil, so its economy could benefit from an improving global outlook. Still, analysts expect the pace of mortgage renewals to slow its economy.

Canada’s mortgage cycle is particularly short (the typical loan term is five years or less, versus 30 in the United States) and many households are likely to renew at higher rates after borrowing at rock-bottom levels during the pandemic.

Upcoming mortgage adjustments and the Canadian dollar’s lower sensitivity to greenback moves than other Group of Ten (G10) peers could cap the currency’s gains, Bharadwaj said.

“We expect the CAD to appreciate given our broad outlook for the USD, but it is unlikely to outperform the G10,” Bharadwaj said.

(For other stories from the February Reuters currency survey:)

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