Canadian dollar falls to lowest level in nearly 2 years amid possible global recession

The value of the loonie fell to its lowest point in nearly two years this week, adding further pressure on Canadians already squeezed by high inflation and the possibility of a global recession.

The Canadian dollar traded for 75.27 cents U.S. on Friday, falling at one point to nearly two-year low of 75.15 cents U.S. earlier in the day.

Meanwhile, the World Bank warned on Thursday that countries could head toward a global recession in 2023 as central banks simultaneously hike interest rates in response to inflation — potentially resulting in lasting harm to emerging market and developing economies.

“It’s going to be more expensive to buy stuff and your dollar isn’t going to go as far,” Lydia Miljan, a professor of political science at the University of Windsor, told CTV National News.

“The cost of borrowing is higher and so obviously that is going to put in some recessionary pressures.”

Importers will feel the pain of a weaker Canadian dollar more acutely compared to exporters who would receive a boost by selling their products in U.S. currency, she said.

What is different this time, Miljan adds, is the possibility of a recession at the same time as high inflation.

She says any financial planner would advise to hold off on any major purchases and start paying off debts as interest rates go up.

“Recessions don’t have to last a long time, but this, coupled with all the other problems we had this year, I think is the last thing that Canadians want to see again,” she said.

The Bank of Canada this month raised its key interest rate to 3.25 per cent, one of a number of hikes it has already made this year as part of a strategy also employed by other central banks to slow inflation.

Analysts say the American dollar is normally seen as a safe haven during times of volatility, with investors parking their money in U.S. bonds, which in turn drives up the currency’s value.

Russia’s war in Ukraine has continued to have an impact on the global economy, as well.

The low value of the Canadian dollar also may affect food prices, which have also remained high due to inflation.

“We do import a lot of food from abroad during the winter to feed ourselves and if the loonie drops even further, it will impact the buying power of our importers,” Sylvain Charlebois, director of Dalhousie University’s Agri-Food Analytics Lab, told CTV National News.

“And that would include obviously our main grocers and different agencies that actually do make sure that we have affordable foods in stores and at the restaurant.”

On the other hand, a recession could lower prices if people choose to spend less money, he said.

With files from CTV News, The Canadian Press and The Associated Press

View original article here Source