The loonie has suffered one of its worst weeks in recent history, plummeting to record lows it hasn't reached in 11 years.
The Canadian dollar sat at 76.72 cents US when the markets closed Friday, a small uptick after falling to 76.69 cents US Thursday and 76.70 cents Wednesday -- the lowest it had been since Sept. 1, 2004.
The dollar disparity has been blamed on dropping oil prices, which recently hit $50 a barrel for the first time in months, and a recent boost in the American economy.
As the loonie continues to sink deeper and deeper, many are asking: How low can the loonie go?
The answer depends who you ask, and your timeline.
“I’m thinking something around 55 cents [US],” said financial expert John Johnston, executive vice-president and chief strategist for Davis Rea, in an interview with CTV News Channel on Friday. “I think that’s the ultimate destination.”
That prediction is a long-term forecast based off commodity prices, which have steadily dropped since 2007, from a peak high of 1.10 cents US, Johnston said. He predicts that, as the global manufacturing sector struggles, the weakening value of Canadian commodities will continue to drag the loonie lower.
It’s a grim prediction that, if true, would undoubtedly affect the day-to-day lives of many Canadians.
“Every Canadian will be hurt by the decline in the Canadian dollar because imported goods will cost more,” Johnston said.
In particular, the western provinces, which largely rely on exports such as oil and lumber, would be hit by weakened commodity prices and a subsequently lower loonie.
“If you’re in a down lag in commodity prices, which I anticipate on a relative basis, western Canada will hurt, central Canada will benefit,” Johnston said. “The Canadian dollar now is certainly pushing us in that direction.”
The 55-cent prediction is on the lower end of other experts’ guesses. In a recent report, the Bank of America forecast a 65-cent loonie as the U.S. is poised to hike interest rates. The Bank of Montreal predicted a modest (but still impactful) 75 cents by fall 2015.
That in mind, Johnston pointed out that forecasting the loonie’s value isn’t an exact science.
“One of the things we’ve learned as analysts over the past decade, with the amount of volatility we’re seeing in financial prices, is [to] never say never. I could see the Canadian dollar going up 10 cents next year and then coming down again. I could easily see it above 100 cents US again.”
In the meantime, he suggests Canadians look outside their own borders at investment opportunities abroad – especially those in the U.S.
“Canadians should have some international exposure to get a more diversified portfolio, whether it’s in equities or bonds,” Johnston said. “That’s the environment we’re in now.”
