Oil slips below $35 US amid continuing strength of U.S. dollar
Some analysts say the loonie could eventually fall to 70 cents US as the currency is pressured by low commodity prices, and the diverging interest rate policies of Canada and the United States. (Mark Blinch/Reuters)
UPDATED
- Loonie has lost 17% of its value in 2015, the second-worst year it’s ever had
The Canadian dollar continued its slide today, closing below the 72-cent US mark for the first time since the spring of 2004.
The loonie ended the trading day at 71.68 cents US, down more than four-fifths of a cent from its close Wednesday. At one point during the day, it was down more than a full cent.
- U.S. Federal Reserve hikes interest rates for 1st time since 2006
- Low Canadian dollar hurts U.S. sunbelt states as snowbirds stay home
Put another way, it now costs almost $1.40 Cdn at official exchange rates to buy a single U.S. dollar. Tack on service fees charged by banks and anyone buying American currency at their local financial institution will end up paying $1.43 or so.
The loonie is on track to post its second-worst year ever, down 17 per cent since Jan. 1, and there’s still a week to go, Bank of Montreal economist Doug Porter noted Thursday. “The only bigger annual decline was in the extreme conditions of 2008, when the Canadian dollar fell 18.6 per cent — a threshold I thought would never even be approached again,” Porter said.
Several factors
The dollar’s drop has been fuelled by several factors, including the continuing slide in oil prices, and the diverging monetary policies of Canada and the United States.
The U.S. Federal Reserve on Wednesday began raising its key lending rate for the first time in nearly 10 years, while the Bank of Canada has indicated it’s in no hurry to follow suit. Some analysts say the Bank of Canada may have to lower rates to jump start the economy.
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