The role reversal between the Canadian and US central banks over the past seven months means the Canadian dollar could remain weak for some time. In October, the Bank of Canada (BoC) responded to the country’s sluggish economy by abandoning its upward bias toward interest rates, which turned what had been a measured decline in the currency into a sharp selloff.

The BoC’s hawkish stance toward monetary policy had been rare among its developed-world peers and was a primary source of the loonie’s strength, until the US Federal Reserve announced it was planning to curtail its extraordinary stimulus. Now the Fed is set to commence a second round of tapering, suggesting that it believes the US economy is finding its footing. Meanwhile, the BoC has become increasingly concerned about Canada’s persistent disinflation, even though it raised its forecast for growth this year.

However, this week Pacific Investment Management Co, better known as PIMCO, reminded investors of the bigger picture with regard to Canada and its declining currency. The asset manager reiterated its long-term bullishness toward the Canadian dollar, citing the country’s “strong economic fundamentals, prudent fiscal situation and long history of the ‘rule of law.’” PIMCO, with $1.92 trillion of assets under management, is one of the largest asset managers in the world, so its investment outlook carries considerable weight.

It believes the country’s attractive fundamentals mean the Canadian dollar will continue to enjoy reserve status among government and other quasi-sovereign funds. As such, PIMCO says it expects to buy the loonie on dips this year.

To be sure, that doesn’t mean PIMCO doesn’t acknowledge the challenges facing the Canadian economy, including the country’s overextended consumers, inflated housing market, and the central bank’s aforementioned concern over disinflation. But it believes the housing market won’t suffer the type of crash that happened in the US. Instead, PIMCO sees a multi-year correction, with the first phase of the decline beginning this year.

And on the disinflation front, the asset manager says that Canada’s lower exchange rate will push up the price of imports. Meanwhile, it believes the effect of price competition among retailers, which was cited by the BoC as one of the main sources of disinflation, should also prove ephemeral.

So long-term investors should be cheered by PIMCO’s support for the currency, even if in the short term the lower exchange rate has been a drag on returns, while also paring income from dividends. But while the BoC and other policymakers would likely welcome a further decline in the currency to boost the country’s export sector, the good news is that most of the damage has already been done.

The loonie currently trades just below USD0.90, off about 10.6 percent from its trailing-year high and down about 15.2 percent from this cycle’s high back in mid-2011. At present levels, the Canadian dollar trades near the consensus forecast for the currency over the next several years, which ranges from USD0.90 to USD0.93 according to Bloomberg’s survey of institutional economists.

The effect of a lower exchange rate should eventually be offset when an improving economy, spurred by an export market whose products are priced more competitively, finally flows through to companies and their share prices. For now, Canadian equities offer a relative value compared to the US market, and building enduring wealth is all about buying stocks when they trade at a bargain.