The Canadian dollar is expected to weaken in the near-term after reaching a 12-week high, before recovering some losses further out, a Reuters poll showed.
The Canadian dollar weakened against its broadly firmer US counterpart on Friday as oil fell and investors braced for possible clues on the timing of US interest rate hikes from Federal Reserve Chair Janet Yellen.
The currency has rebounded 9 percent since hitting C$1.4689 in January, its weakest since April 2003, threatening to break a longer-term bearish trend.
It has been helped by stabilisation in oil prices, fading expectations of a Bank of Canada rate cut and promised fiscal stimulus, as well as the unwinding of extreme short positions by speculators.
The poll of 42 foreign exchange strategists forecast the currency would weaken to C$1.38 in a month from Wednesday's close of C$1.3415, though this was still stronger than the C$1.42 expected in February's poll.
The currency is expected to recover to C$1.37 in six months and C$1.35 in a year, versus C$1.40 and C$1.37 in the previous survey. The range for the 12-month forecasts was wide, running from C$1.20 to C$1.50.
While a majority of economists, 17 of 28, in a separate poll said the currency would not revisit its 12-year low this year, 11 said it would, noting uncertainty surrounding Federal Reserve rate hikes, oil prices and the US Presidential election in November.
"Anticipation of Fed tightening late this year will produce further downward pressure on the Canadian dollar," said Mark Hopkins, a strategist at Moody's.
Oil prices have rebounded more than $8 from a 12-year low at $26.05 in February, but strategists are skeptical the rally will be sustained amid a global supply glut. "The downside risks to global oil prices pose parallel downside risks to the Canadian dollar," said PNC strategist, William Adams.
"Our gut feeling is that further C$ weakness is likely in the short run, but that the loonie will finish the year higher than it is today," said Sebastien Lavoie, assistant chief economist at Laurentian Bank.
A substantial slowdown in fourth-quarter annualised growth to 0.8 percent suggests the economy is still hurting from low oil prices, although that rate of expansion topped the Bank of Canada's projection.