The Canadian dollar was higher Thursday morning as the currency continued to stabilize following a series of sharp declines. The loonie was up 0.15 of a cent to 91.52 cents US following a flat performance in the previous session.
But for the year so far, the Canadian dollar is the worst performer among major global currencies, sinking about 3 per cent against the U.S. dollar since the start of the year.
The euro, the British pound and the Swiss franc also lost value against the greenback since the start of the year, but none of those devaluations have cracked the 3 per cent mark.
The reasons for the decline are many. One is that the greenback has gained in value as the Federal Reserve starts to back away from its massive monthly bond purchases.
But recent Canadian economic data has disappointed markets, particularly reports last week showing a rising trade deficit and December employment data showing the loss of 46,000 jobs.
A report at Bloomberg News indicates that shorts on the Canadian dollar — meaning bets against it — are running at more than twice the usual rate. Observers attribute that to Canada’s weak foreign trade numbers.
“Now Canada buys more iPhones than it sells BlackBerries,” James Kwok, a currency manager at Amundi Asset Management, told Bloomberg.
“A lot of structural changes have been happening in Canada over the last few years, which has made Canada’s trade balance structurally weaker.”
The Bank of Canada's dovish stand on interest rates has also contributed to the fall and traders are particularly looking to what the central bank has to say next week in its next scheduled announcement on interest rates. Governor Stephen Poloz has signalled the bank is in no rush to raise rates and analysts aren't looking for a hike until next year.
In fact, some are looking for the bank to cut rates. Mark Chandler, Head of Canadian FIC Strategy at RBC Dominion Securities observes that "there is a significant minority of observers believing that a shift towards an easing bias is in the cards next week and, unless the notion is dispelled, it is hard to imagine the Canadian dollar reversing some of its recent losses.''
— Huffington Post Canada with files from The Canadian Press
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