© Reuters. FILE PHOTO: A Canadian dollar coin, commonly known as a “Loonie,” is shown in this illustration image taken in Toronto.
By Fergal Smith TORONTO (Reuters) – The loonie is expected to rally further over the next year as the global economic recovery takes hold, and gains could accelerate if investors sense that the Bank of Canada is bracing for reduce monetary stimulus, strategists say. The median forecast of nearly 40 analysts in a Reuters poll was for it to strengthen 1% to 1.27 to the US dollar, or 78.74 cents, in three months, coinciding with the forecast in the January survey. Then it is expected to rise to 1.25 in a year. “Global reflation and commodity price support this year and therefore CAD direction is very likely to be clear – pacing is the only debate,” said Derek Halpenny, head of research, markets. Global EMEA and MUFG Bank International Securities. Canada is a major producer of raw materials, including oil, which has risen about 17% since the beginning of January. It hit a one-year high above $ 56 a barrel on Friday, as the Organization of the Petroleum Exporting Countries and its allies decided to stick with production cuts. Economists in a Reuters poll last month predicted global growth would rise 5.3% this year after contracting 3.9% in 2020, helped by advances in the COVID-19 vaccine and accommodative monetary policies. The Bank of Canada has indicated that it will keep its benchmark interest rate at a record low of 0.25% through 2023, but money markets have been weighing the possibility of an increase before. “I don’t see rates going up any more this year, but the (BoC) communications could fuel expectations that will help provide more support for CAD than we currently assume,” Halpenny said. Strategists say the central bank could reduce the pace of its quantitative easing purchases in the coming months. It owns nearly 40% of outstanding government bonds, up from 14% at the beginning of last year. Analysts at Monex Europe and Monex Canada, including Simon Harvey, expect a “sustained rally” for the loonie, which has strengthened about 13% since last March, when the dollar fell.[EUR/POLL] Still, there are risks to the outlook, analysts say in a note, including difficulties in delivering COVID-19 vaccines and a U.S. effort to ensure federal agencies buy U.S.-produced products. Canada will succeed in inoculating its population despite “momentary disruptions” in vaccine supplies and is working closely with the new US administration to combat the disease, Prime Minister Justin Trudeau told Reuters on Thursday. Last week, Trudeau said Canada will seek exemptions to US President Joe Biden‘s “Buy American” program. Canada ships about 75% of its exports to the United States. (For other stories from the February Reuters currency poll 🙂