TORONTO – The Canadian dollar ended the day at its lowest point in more than 12 years on Wednesday as worries over global economic growth continued to roil equity markets worldwide and drag down commodity prices.
The oil-sensitive loonie closed down 0.46 of a U.S. cent at 71.02 cents U.S. after falling below 71 cents earlier in the day.
That marked the dollar’s lowest close since July 2003 when it was recovering from a historic low of 61.79 cents US set in January 2002.
The February contract for benchmark crude oil dropped $2 to settle at US$33.97 a barrel, the lowest level since 2008, while gold, seen as a safe haven in times of uncertainty, rose $13.50 to end trading at US$1,091.90 a troy ounce.
On equity markets, the Toronto Stock Exchange’s S&P/TSX composite index tumbled 193.34 points to end the day at 12,726.80, the sixth consecutive losing session of a post-Christmas slump.
In New York, the Dow Jones average fell 252.15 points to close at 16,906.51, while the S&P 500 lost 26.45 points to 1,990.26 and the Nasdaq dropped 55.67 points to 4,835.76.
Norman Raschkowan, senior partner at Sage Road Advisors, said there appear to be few reasons for optimism about the Canadian economy, with tepid global growth dragging down prices for the country’s commodity exports, including oil.
“Everybody’s in the more bearish, more concerned camp,” he said. “The more cyclical sectors are getting hit harder, the resource sectors in particular, so Canada feels the brunt of that.”
A spat between Saudi Arabia and Iran earlier this week did little to budge the oil price, Raschkowan said, reinforcing the market’s concerns about crude’s outlook.
The loonie has been trading progressively lower for some time, partly because of the declining value of crude oil and other commodities, as well as slow economic growth and the U.S. dollar’s rise against most major currencies.
On Tuesday, Bank of Montreal chief economist Douglas Porter told a gathering of leading economists that the loonie could fall below 70 cents U.S. before it begins to recover.
A dim economic future hurts the dollar in part because it gives investors little reason to buy up the Canadian dollars they need to invest in Canadian companies, Raschkowan said.
McGill University economics professor Chris Ragan said a cheap Canadian dollar means consumers can expect to pay more for imports such as coffee, tropical fruits and consumer electronics.
At the same time, he said, a low loonie should help boost Canada’s exports and foreign investment.
“If the Canadian dollar is low, stays low and is seen to stay low for some time, then that’s one more reason why you do your next expansion plant in Ontario rather than in Michigan,” he said.
In other commodities, February natural gas fell 5.8 cents to US$2.267 per mmBtu and March copper shed 0.75 of a cent to US$2.088 a pound.
Note to readers: This is a corrected story: An earlier headline said loonie hadn’t been below 71 cents US since 2013, rather than 2003.