BUSINESS REPORT: No long-term relief in sight for the suffering loonie

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The Canadian dollar has fallen right out of favour, tumbling more than five per cent against the U.S. dollar since Feb. 1, and that downtrend could continue unless some progress is seen in U.S. free trade talks.

Once 80.50 cents U.S. at the beginning of February, the dollar hit an inter-day low on Tuesday morning of 76.95 cents U.S. cents before a significant oversold bounce.

READ MORE: Steel and aluminum tariffs: From jobs to prices, how the new levy could affect Canadians

This comes as the Bank of Canada is pursuing a more cautious path when it comes to raising interest rates this year.

Some consensus is building that we may see either just a single a rate hike, or perhaps no hike at all, from the Bank of Canada in 2018.

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The floundering loonie seems to be doing nothing for Canadian trade as Bank of America Merrill Lynch pointed to a scenario in which the loonie would have to drop 10 per cent to increase net trade by one per cent of GDP.

READ MORE: President Bush imposed steel tariffs in 2002 — and it didn’t go so well for the U.S.

On Tuesday morning, U.S. Treasury Secretary Steven Mnuchin said a successful renegotiation NAFTA  would result in the Trump administration exempting Canada and Mexico from steel and aluminum tariffs.

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