The beaten-down loonie will head even lower by this summer, one of Canada's largest banks predicted Thursday.
TD Bank economists Craig Alexander and Leslie Preston said in a note Thursday that they expect the Canadian dollar to sink as low as 85 cents against the U.S. dollar later this year, before rebounding slightly to back near the 90-cent level sometime in 2015.
"The factors which have taken the Canadian dollar lower are unlikely to shift over the next year or so," they said. "In the near-term, the loonie is forecast to fall as low as 85 cents U.S. by mid-year. However, it is then expected to appreciate slightly as inflation in Canada starts increasing and the Bank of Canada gets closer to raising interest rates."
The loonie flip-flopped Thursday morning,settling around the 89.63 level. That was up slightly from Wednesday's level, but it has been seesawing all day. It closed with a gain of 0.1 of a cent to 89.56 cents U.S.
The loonie has lost almost five cents since the start of the year, caught up in a global trend that's seeing the U.S. dollar gain in value against almost every other currency.
"When Canadians talk about the Canadian dollar, what they really mean is the value of a Canadian dollar relative to a U.S. dollar, so even if nothing changes in Canada’s fundamentals, a strengthening U.S. dollar will see the loonie fall," TD said.
Weak economic data and slumping commodity prices have also contributed to the loonie's decline.
"The downward trend in [the Canadian dollar] is too strong to fight or attempt to pick a bottom," Scotiabank's currency strategist, Camilla Sutton, said in a separate note Thursday morning.