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Loonie Value Could Drop Even Further If Oil Prices Stay Where They Are: CIBC

For now, it's doing better than that.

The loonie is going to need a barf bag after the wild ride it endured in 2016.

The Canadian dollar began the year at around $0.68 against the U.S. dollar in January, only to see a "'Revenant'-like" recovery that took it as high as $0.79 in May, and saw it close at around $0.77 on Thursday.

But the end of the year could see its value descend once more, to $0.73, according to a report from CIBC Capital Markets.

The bank said that stagnant oil prices, which currently sit in the range of $50 per barrel, could mean that the Canadian dollar falls to that level by the end of the year, said the Financial Post.

It's a more optimistic projection than CIBC previously had, but it still represents a drop to well below current levels. It once believed that the dollar would go lower with a September interest rate hike by the U.S. Federal Reserve, a hike it now expects in December.

The drop is likely to happen later in the summer, when Statistics Canada releases its economic analysis for the second quarter.

BMO said last month that the economy is likely to contract by one per cent before it rebounds in the third quarter.

The expected contraction is being blamed on a number of factors, such as the Alberta wildfire, as well as a drop in exports and declining business investment.

The lower dollar could make it more difficult for Canadians to shop or plan vacations in the U.S.

But it also creates more favourable conditions for exports, as it did earlier this year, when volume grew by 3.6 per cent, according to Reuters.

Economists have said Canada should start depending more on exports if it wants to grow its economy with oil at lower prices than it has seen in recent years.

CIBC added that the dollar could rebound to around $0.75 next year if oil prices climb to $60 per barrel.

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