TORONTO – The Canadian dollar fell more than a full U.S. cent Tuesday to its weakest level since late April 2009 amid a weaker than expected manufacturing report that came out a day ahead of the Bank of Canada’s next announcement on interest rates.
The loonie fell 1.1 cents US as Statistics Canada reported that manufacturing sales fell 1.4 per cent in November to $51.5 billion. It was the third drop in four months.
The result compared with a drop of 0.7 per cent that economists had expected.
The agency says the decline was due to lower sales of motor vehicles, chemicals, primary metals and food.
The central bank is widely expected to leave its key rate at one per cent, where it has been since September 2010 as the global economy slowly recovers from the 2008 financial crisis.
But there is growing uncertainty as to the pace of rate hikes because of the collapse of oil prices and the effect this is having on the Canadian economy.
Crude prices have plunged 55 per cent from June 2014 and are down 40 per cent just since the end of November after OPEC ruled out production cuts to support prices.
On Tuesday, the March crude contract in New York fell $2.66 to US$46.47 a barrel.
Metal prices failed to find lift from data showing that Chinese economic growth for 2014 came in above expectations. Gross domestic product grew by 7.4 per cent, better than the 7.3 per cent read forecast by analysts but also the weakest expansion in nearly a quarter century. March copper declined two cents to US$2.59 a pound.
Gold prices advanced with the February contract ahead $17.30 to US$1,294.20 an ounce.
Meanwhile, the International Monetary Fund lowered its forecasts for global growth over the next two years, warning that persistent weakness in most major economies will outweigh the boost from lower oil prices. It lowered the projections it issued in October by 0.3 of a percentage point and now expects global growth at 3.5 per cent this year and 3.7 per cent in 2016.
Traders are also looking to the European Central Bank to unveil on Thursday a major program of quantitative easing involving the massive purchase of government bonds in a move to increase inflationary pressures. Economic growth has been tepid and there have been worries that the region could fall prey to deflation, a situation where businesses and consumers hold off on purchases in the hope that items will just get cheaper.