TORONTO – Lagging commodity prices and an interest rate hike south of the border have sent the loonie plunging below 72 cents US for the first time since May 2004, extending a string of 11-year lows for the Canadian currency in recent weeks.
Shortly afternoon Thursday, the Canadian dollar was trading at 71.53 cents US, down 1.01 U.S. cents from Wednesday’s close.
The value of the Canadian dollar has been hurt by a number of factors, many related to the strength of the American dollar as well as weak global market conditions for key commodity exports, including oil.
The Federal Reserve’s decision to finally raise key U.S. interest rates on Wednesday, after months of signals that an increase was coming, also helped push up the American dollar against the British pound, Japanese yen, Australian dollar and the euro.
David Watt, chief economist at HSBC Bank of Canada, said the lower loonie could provide a boost to Canadian exports. However, he noted that the low value of the Canadian dollar also hints at weakening global demand for those very exports which support the loonie.
“If you want to be an optimist, you lean on the one side that it will help boost exports,” said Watt. “I tend to lean more to the second side, that it reflects a degree of concern about the global economy.”
On equity markets, the S&P/TSX composite index fell 157.96 points to 13,008.12, the Dow Jones average of 30 stocks gave back 140.57 points to 17,608.52 and the broader S&P 500 index declined 19.28 points to 2,053.79. The Nasdaq lost 35.91 points to 5,035.23.
On the commodity markets, the February gold contract fell $25.10 to US$1,051.70 an ounce, the January contract for benchmark crude was down 83 cents at US$34.69 per barrel and copper was down three cents at US$2.04 per pound.
Meanwhile, the January contract for natural gas was up one cent at US$1.80.