The Canadian dollar will drop against its U.S. counterpart after reaching levels that threaten growth, according to the global head of foreign exchange at Bank of Montreal's investment-banking unit.
"The Canadian dollar is approaching extreme price levels where it is going to have an impact on the domestic economy," BMO Capital Markets's C.J. Gavsie said in an interview by telephone. "The recent strength is going to be hurting the demand we have seen."
The loonie rallied 5.2 per cent against its U.S. peer since June 1 and matched the strongest level in three months, at 98.43 cents per dollar on Aug. 28. It strengthened 0.6 per cent, to 98.62 cents, at midafternoon in Toronto on Friday.
BMO's Gavsie said investors, including central banks and sovereign wealth funds, have favoured the loonie to diversify their holdings and as a haven from the debt crisis in the euro region.
Bank of Montreal is Canada's fourth-largest lender.
