A currency expert is predicting mixed performance from the Canadian dollar next year. 

Bipan Rai, global head of FX Strategy at CIBC Capital Markets, told BNN Bloomberg that he expects the loonie’s 2024 performance will be a “story of two halves.” 

“We could see some degree of Canadian dollar strength return in the third and fourth quarter next year. We just think that in the first and second quarter of 2024, it's going to be a more challenging environment for the Canadian dollar,” Rai said. 

During the first half of the year, Rai said he expects markets will “course correct” their interest rate expectations for the Bank of Canada and the U.S. Federal Reserve. 

That should align with a period of strength for the greenback during the first quarter, he said.  

If economic data out of the U.S. is stronger than Canadian economic indicators early next year, Rai said he expects a correction will push the loonie higher.

Thierry Wizman, a global interest rates and currencies strategist at Macquarie Group, said in an interview with BNN Bloomberg Wednesday that the Fed plays a “big role in setting the tone for the U.S. dollar overall.”

Additionally, he said that since the Canadian dollar is one of the most “important counterparts” to the U.S. dollar and when it rallies it does so against the loonie among other currencies. 

WHAT IS HAPPENING WITH THE DOLLAR NOW?

The Canadian dollar was trading at 75 cents U.S. as of Wednesday afternoon. 

Karim Buckle, account executive at Deaglo and former executive director of investment banking at Goldman Sachs, said the loonie has been trading higher recently for three main reasons. 

In a written statement on Tuesday, Buckle pointed to the interest rate advantage held by the U.S. dollar compared to other major currencies, which has narrowed as market participants price in U.S. rate cuts early next year.

Bank of Canada Governor Tiff Macklem’s comments last week that it is too early to consider rate cuts have also driven the Canadian dollar higher, according to Buckle. 

Lastly, he said the loonie has gained on the U.S. dollar due to disruption in the Red Sea from Houthi attacks, which have brought the price of oil higher.