The Canadian dollar has been trading at a discount for some time, but strategists at Desjardins Group suggest it may not be a value trap. They argue that some of the structural challenges weighing on the currency could be easing.
Using the purchasing power parity model, chief economist Jimmy Jean and foreign exchange strategist Mirza Shaheryar Baig estimate that the Canadian dollar is about 22 per cent undervalued against the U.S. dollar. This analysis suggests that the loonie may have more room to appreciate in the near future.