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Candian dollar coin

Canadian Dollar Starting to Lose Momentum, Approaching US $.80

Posted Friday, April 16, 2021 by
Timothy St. John • 2 min read

The Canadian economy’s promising growth through the end of last year in the beginning of this year seems to be slowing down. The Canadian loonie is staying very close to $0.80 on the US dollar.

The market was looking very good for the Canadian dollar up until just a few days ago, but it is now showing signs of slowing down. On Thursday, the promising trend started to show some signs of change. The Canadian dollar gave the worst G10 currency performance, trading at 79.73 US cents.

This reverse in course has been attributed to restrictions placed on the economy for investors. On Thursday, the provincial government of Ontario met to discuss new restrictions, indicating that things are going to get worse before they get better. This, coupled with a decrease in factory sales that was larger than expected, create an unsavory picture for the near future of the Canadian economy.

Reports on Canadian manufacturing sales showed a 1.6 decrease decline, greater than the predicted 1% decline. Statistics Canada determined this was due to shortages with semiconductors and an inability to meet demands. This has slowed down production at various auto plants around the country.

New talk of restrictions comes on the heels of a third wave of coronavirus hitting Canada. About 70% of the new cases of coronavirus come from a variant, which is proving difficult for medical institutions to deal with. The current vaccine is only designed to handle the older version of the coronavirus, meaning that increased cases of variants could keep the economy from reopening anytime soon.

The loonie has done well for the year overall, however, gaining 1.5% since January. It is likely to be affected by a pending decision from the central bank on interest rates. A decision on those rates will be made next week.

It is not all financial doom and gloom, though. The Canadian government bond has seen a rebound, like the loonie, reaching 1.469%, up from 1.434% on March 11th.

Significant gains in the Canadian loonie are not expected until at least some restrictions are lifted and overall coronavirus cases start to drop. The small gains made so far in this year look like they may be coming to an end because of the third wave of coronavirus and a lower than expected economic performance. Canadian hospitals are currently overwhelmed with coronavirus cases, and the country could be seeing around 18,000 new cases each day by the end of next month.

 

 

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