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Canadian dollar forecast to turn more bullish

TORONTO –

A Reuters poll shows the Canadian dollar will be stronger than previously thought next year as oil prices climb and investors bet the Bank of Canada will raise interest rates at a faster rate. faster than the US Federal Reserve.

The median forecast in a Reuters poll is for the Canadian dollar to rise about 2% to 1.25 per dollar, or 80 cents, in three months, compared with 1.26 in the previous month’s forecast.

After that, it is predicted to increase to 1.22 in a year.

Petroleum is one of Canada’s major exports. Its price has risen to nearly $90 per barrel, the highest since October 2014, and some experts are expecting further increases.

Derek Halpenny, head of global market research for EMEA and international equities, MUFG Bank, said: “Our energy analyst in the Middle East has just made a pretty remarkable forecast for the crude oil for 2022. “We see that as one of the factors that lift the CAD.”

Major oil producers blame soaring prices on consuming nations’ failure to secure adequate investment in fossil fuels as they transition to greener energy, amid recent tensions between Russia and Western powers added to concerns about tight supply.

Halpenny said the potential for the Bank of Canada to tighten its currency more than the Federal Reserve in 2022 could also support the loonie.

Last week, Canada’s central bank left its benchmark interest rate unchanged at a record low of 0.25% but said it would need to raise rates to cool inflation. Money markets expect the first rally in March and a total of six this year, one more than the Fed expected.

Canada’s economy climbed above pre-pandemic levels for the first time in November, while preliminary estimates suggest gross domestic product grew 6.3% year-on-year in the fourth quarter, beating forecasts of 5.8 % of the BoC.

The Canadian dollar is the only G10 currency to appreciate against the greenback in 2021, up 0.8%.

Speculators have not yet lost the potential for further gains. According to data from the US Commodity Futures Trading Commission, they raised their bullish bets to their highest levels since last July.

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