If you’ve been holding back buying some U.S. greenbacks for an upcoming trip or purchase hoping the loonie would recover some ground from its present lows, you’ve got a window of about four weeks to do so.
Starting in mid-December, the Canadian dollar is widely expected to face a substantial amount of downside pressure. On Dec. 16, the U.S. Federal Reserve, or central bank for the United States, will make its next decision on interest rates in that country.
The overwhelming consensus is that the Fed will raise its key rate that day, inaugurating a long-awaited “rate lift off” for the world’s biggest economy from the ultra-low interest rate levels that have been in place since the financial crisis to help boost growth.
MORE: Latest coverage — the plunging loonie
Ultra low borrowing rates are no longer needed for the U.S. economy to grow. But higher rates – or a rate “tightening cycle”– will have some consequences for the global economy, as well as here in Canada. And that includes knocking the loonie lower.
“We expect the Canadian dollar to hit a bottom of 71.4 cents U.S. in the first quarter of 2016,” TD Bank economists said in a new research note on Monday (the first quarter runs January through to the end of March). The loonie is currently trading at 75 cents U.S.
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The Canadian dollar will likely stay around that low 70-cent level for some time, too, TD believes.
WATCH: For Canadian travellers thinking of spending some time south of the border, the falling dollar has made it more difficult but not impossible to take a trip. Seán O’Shea reports.
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