USD to CAD Forecasts
Canadian dollar has gone from best performers of 2021 to one of worst. Although it has recovered somewhat, against the greenback, since its mid-year lows.
SupportCAD outlook
Given the outperformance of the CAD in 2021, it was no surprise to see some consolidation from late October as investors took profits. However, by the end of the year the gloss was well and truly off the loonie with it falling to a 1-YEAR LOW below 78 cents.
CADUSD has however revived somewhat in the first weeks of 2022 with the level heading back towards 80 cents.
| USD/CAD was | Change | Period |
|---|---|---|
1.2705 04 Jan 2022 | 1.5% ▼ | 2 Weeks |
1.2326 20 Oct 2021 | 1.5% ▲ | 90 Days |
1.2750 18 Jan 2021 | 1.8% ▼ | 1 Year |
1.3322 19 Jan 2017 | 6.1% ▼ | 5 Years |
1.0132 21 Jan 2012 | 23.5% ▲ | 10 Years |
1.6046 23 Jan 2002 | 22% ▼ | 20 Years |
USD/CAD Forecasts
The Canadian dollar had a difficult end to 2021 being weighed down by slumping crude oil prices, one of the currency’s biggest drivers for gains against the USD and the view that US inflation and interest rates were heading up.
Many market participants have been heavily favouring the CAD over the USD, so any unwinding of these positions will leave the CAD vulnerable to a sell-off, reducing demand and decreasing its value.
ING think CAD is in oversold territory. They expect more tapering by the Bank of Canada to support the Canadian dollar into year-end, and the short positioning may help limit the loonie’s downside.
In 2021 the market’s expectation for a rise in US inflation and thus interest rates pushed up the USD exchange rate against most currencies.
This trend is seemingly continuing into 2022 although with a slight hiccup for the greenback mid January with Mr Powell’s confirmation hearing testimony disappointing the markets about the imminence of rate hikes.
Risks associated with Canadian house prices
The Bank of Canada’s announcement in late April to bring forward the time when it expects to raise interest rates helped the Canadian dollar to rise up above US80 cents (USD below C$1.23).
The Canadian central bank’s decision to cut back its bond purchases – quantitative easing (QE) – was due to Canadian house prices, employment and the currency.
The Canadian Real Estate Association calculated house prices had climbed 17 per cent in 12 months.
“The bank will continue to monitor the potential risks associated with the rapid rise in house prices,” the Bank of Canada said in its statement this week and said it was “tapering” its asset purchases due to the “progress made in the economic recovery”.
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Note that forecasts and predictions for the USD/CAD exchange rate change all the time, affected by news events and relative sentiment towards the Canadian and US economies and this exchange rate is even more volatile than usual because of the uncertainties around the Coronavirus pandemic.
You can read more about other CAD exchange rate forecasts here CAD Forecasts for 2021.
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Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.