The Canadian dollar is singled out as one of the favourites for more appreciation in a new report from UBS AG.

In the report, UBS argues that the era of policy coordination that followed the global financial crisis is more or less over, and that policymakers are increasingly taking their own roads.

Looking ahead, UBS says, “we are likely to see more single-handed actions that amount to a ‘beggar thy neighbor’ policy, in which one country aims to improve its competitiveness against the global community through actions such as simple money-printing or currency manipulation.”

“In our view, currency markets are reacting quite sensitively to the ‘new individualism’ in policymaking by major governments,” it says, noting that recent moves such as Japanese currency intervention, and talk of further quantitative easing in the U.S. and UK, has not been coordinated and potentially has “a strong negative impact on other major economies”.

UBS notes that it has long been skeptical about the prospects for the U.S. dollar, and with recent talk of it needing to undertake a second round of quantitative easing measures, “our skepticism on this potential — and with it, the dollar’s ‘safe haven’ appeal in times of crisis — has increased.”

UBS sees Canada in a position to benefit. “On the one hand, should the U.S. introduce quantitative easing, Canada will profit directly without even having to pay for it,” it points out.

“On the other, it cannot hurt Canada if the U.S. starts to take off and avoids another dip.” UBS forecasts parity for the loonie and the U.S. dollar over the next three months, and a couple of cents of appreciation beyond that in the next six to 12 months.

IE