Canadian dollar tumbles to close below 72 cents US, the lowest in nearly 12 years
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.
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.
"CAD is trading at its lowest levels since May 2004, pressured by its key drivers of relative central bank policy and oil prices — CAD correlations to both are currently extremely elevated," said a morning currency commentary from Scotiabank, referring to the trading symbol for the Canadian dollar.
Some forecasts say the Canadian dollar could eventually hit 70 cents US. That's more a factor of the U.S. dollar increasing in value than the Canadian dollar going down, as the loonie is actually holding up fairly well when compared to most major currencies that aren't the U.S. greenback.
Speaking to reporters in Vancouver, Prime Minister Justin Trudeau said the U.S. economy's resurgence driving down Canada's dollar is a double-edged sword for the economy.
"Obviously the economy of our largest trading partner picking up is a good thing, potentially, for Canada," he said, "but whenever there are shifts in the value [of the loonie], especially decreases, there are both challenges and opportunities."
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