The drop marks an unprecedented third consecutive year of the loonie’s poorest performance since 1970, having lost more than 25 per cent of its value since 2012 (from USD 1.01 to USD 0.7227).
The development came on the heels of a worldwide decline in oil prices and oilsands production. These drastic shifts in the global oil industry hit Canada’s petro-inclined currency especially hard.
Aside from devalued oil, Canada’s economy also suffered from reduced exports in the manufacturing sector. Analysts noted that a lack of diversification (Canada has traditionally leaned on oil and auto manufacture) is making it harder for the loonie to bounce back from its current slump.
The country’s attempt to become an energy superpower has led to the neglect of R&D – a step, former Bank of Canada governor David Dodge noted, that ultimately led to the government’s difficulties in resolving the present situation.
“We’re going to have to go back, having lost a decade on the technological side,” Dodge told the Financial Post
Predictions for the Canadian dollar remain divided. While many observers are expecting a decent finish higher than the currency’s record low of USD 0.7144, other forecasters are projecting a more significant fall to USD 0.69.
The Canadian dollar welcomed 2016 with a record-breaking duration of decline, registering a 16 per cent drop versus the U.S. dollar over the past year.