By Candice Zachariahs
Nov. 10 (Bloomberg) -- The Canadian dollar will plunge 10 percent over the next three months because of falling commodity prices and dwindling capital inflows from emerging economies as global growth slows, according to Barclays Capital.
Barclays forecasts Canada's currency, or loonie, will fall to C$1.24 versus the U.S. dollar in one month and C$1.31 and C$1.30 over the next three and six months. It will trade at C$1.28 in 12 months, New York-based currency strategist Steven Englander at the unit of the U.K.'s second-largest bank wrote in a report dated Nov. 7. Capital inflows will diminish as demand for the nation's assets falls, said Barclays.
The Canadian dollar dropped to a four-year low of C$1.3017 to the U.S. currency on Oct. 28 as oil prices tumbled. The cost of a barrel of oil was $63.82 compared with a record high of $147.27 in July. Crude oil accounted for 10 percent of Canada's export revenue in 2007.
Canada's dollar ``is out of line with commodity prices and other commodity currencies,'' Englander at the third-biggest foreign-exchange company wrote. It will ``weaken significantly as the Canadian economy responds to the plunge in global commodity prices and the drop in global activity.''
The Canadian dollar traded at C$1.1794 per U.S. dollar as of 10:53 a.m. in Tokyo, from C$1.1893 on Nov. 7. It has declined 9.6 percent over the past three months while currencies of other commodity-exporting nations like Australia and Brazil plunged 23 percent and 25 percent.
Canada's trade surplus may get ``close to zero'' in the coming months as commodity prices fall, said Barclays.
``Exacerbating the potential outflow is that much of the recent investment in Canadian long-term assets has come from emerging-market investors, who may be relatively quick to repatriate as their own currency comes under pressure,'' Englander wrote.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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