Canada’s dollar needs to remain weak for years to revive battered manufacturers, according to David Rosenberg, chief economist at Gluskin Sheff & Associates Inc.
The currency reached the weakest since 2004 on Aug. 5 at C$1.3213 per U.S. dollar, after the central bank cut interest rates for the second time this year citing a drop in energy investment and puzzling weakness in other exports. The currency may need to trade between C$1.30 and C$1.40 for at least several years.
“It’s going to be less about how much further it goes from here, it’s already been an epic decline,” Rosenberg said in an interview Monday with Joe Weisenthal and Scarlet Fu on Bloomberg Television. “It’s really going to be many, many years that the Canadian dollar really flirts with the bottom that it’s at right now.”
Canada’s manufacturing market share with its free trade partners the U.S. and Mexico has fallen to a record low, Rosenberg said. Part of that is payback from when the nation’s currency reached parity with the U.S. dollar, which happened in 2007 and again as recently as 2013.
“We are paying the price for those years where the Canadian dollar went above par,” he said. “You have gone through a real gutting of the manufacturing base here to a point where even with the Canadian dollar where it is today, Canada’s manufacturing share in Nafta is at an all-time low.”
Rosenberg said he wouldn’t be surprised to see U.S. gross domestic product growth of 3 percent in the third quarter, and he predicts there’s about a 50 percent chance the Federal Reserve raises interest rates in September.