Canadian Dollar’s Growing ‘Mini-Dollar’ Status Puts It at Risk

The Canadian dollar’s increasingly tight linkage to the US dollar risks dragging the loonie lower against global peers as the greenback weakens, according to RBC Capital Markets.

In recent years, the loonie has traded like a “mini-dollar” as one of the correlations between the two currencies to strengthen to its highest level since the early 2000s, Daria Parkhomenko, a foreign-exchange strategist at RBC, said in a Friday note. That’s despite the fact that Canada has been diversifying and reducing trade with the US — its biggest partner. And as the relationship grows it means any structural weakness in the world’s reserve currency will spillover into the loonie.