01/30/2014 10:20 EST | Updated 04/01/2014 05:59 EDT

Canadian dollar headed to 85 cents US, TD says

The beaten-down loonie will head even lower by this summer, one of Canada's largest banks predicted Thursday.

TD Bank economists Craig Alexander and Leslie Preston said in a note Thursday that they expect the Canadian dollar to sink as low as 85 cents against the U.S. dollar later this year, before rebounding slightly to back near the 90-cent level sometime in 2015.

"The factors which have taken the Canadian dollar lower are unlikely to shift over the next year or so," they said. "In the near-term, the loonie is forecast to fall as low as 85 cents U.S. by mid-year. However, it is then expected to appreciate slightly as inflation in Canada starts increasing and the Bank of Canada gets closer to raising interest rates."

The loonie flip-flopped Thursday morning,settling around the 89.63 level. That was up slightly from Wednesday's level, but it has been seesawing all day.

The loonie has lost almost five cents since the start of the year, caught up in a global trend that's seeing the U.S. dollar gain in value against almost every other currency.

"When Canadians talk about the Canadian dollar, what they really mean is the value of a Canadian dollar relative to a U.S. dollar, so even if nothing changes in Canada’s fundamentals, a strengthening U.S. dollar will see the loonie fall," TD said.

Weak economic data and slumping commodity prices have also contributed to the loonie's decline.

"The downward trend in [the Canadian dollar] is too strong to fight or attempt to pick a bottom," Scotiabank's currency strategist, Camilla Sutton, said in a separate note Thursday morning.