BUSINESS REPORT: Expect a painful ride for the loonie amid stock market selloff

File photo. THE CANADIAN PRESS/Paul Chiasson

There are storm clouds on the horizon for the Canadian dollar.

The U.S. dollar has been moving steadily higher over the last two weeks. And amidst the stock market turmoil, what is known as the “pain trade” — the move to safe haven U.S. dollars — has hit the loonie.

Indeed, BMO chief economist and managing director Doug Porter warns “the loonie has never met a financial selloff it didn’t want to join. It usually gets walloped alongside other ‘risk’ assets.”

The big catalyst this week could be U.S. inflation numbers due Wednesday, and with the U.S. set to raise interest rates three or four times in 2018, it could set the stage for a further selloff in our dollar.

With lower oil prices, a lousy jobs report Friday and weaker oil prices, the deck is stacked against the loonie.

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BMO’s year-end target for the dollar is around 83 cents, a long way away.

It may be a painful ride with some analysts forecasting a 74-cent dollar in the nearer term.

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