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Days of dollar parity at end, loonie likely to fall below 90 cents US: RBC
Thu Apr 3, 11:18 AM The Canadian Press

OTTAWA - The high-flying loonie is likely to descend to the 90-cent-US level later this year and continue weakening into next year, says a new forecast from Canada's largest bank.

The Royal Bank research report predicts the Canadian economy will outperform that of its southern neighbour, but a U.S. recovery in the second half of 2008 and the curtailment of Federal Reserve interest rate cuts will strengthen the American dollar.

"By the end of the year, we expect the loonie to average 90.9 US cents," says the report from RBC economist Craig Wright.

"This depreciating trend will extend into 2009 with the currency dropping further to 87 US cents by the end of that year."

The loonie has been near or above parity with the greenback for half a year, hitting a record $1.10 in November and trading Thursday morning at 99.08 cents.

The RBC forecast agrees with most other economic outlooks that the domestic economy will slow as the U.S. slump drags down Canadian exports and the manufacturing sector.