Loonie tumbles over 1/2 a cent U.S. on worries about falling oil prices

TORONTO – The Canadian dollar hit its lowest point in six years Friday as oil prices continued to fall and the unemployment rate went up in February.

The loonie ended the day down 0.53 of a U.S. cent to 78.19 cents after falling below the 78-cent level for the first time since March 2009.

Earlier, Statistics Canada reported that the economy shed 1,000 jobs during the month. The unemployment rate also rose by 0.2 of a percentage point to 6.8 per cent as more people looked for work.

Oil prices continued to decline for a fourth day with the April contract down $2.21 to US$44.84. Oil prices have collapsed since mid-summer, falling by more than 50 per cent amid a global glut of oversupply.

On Friday, the International Energy Agency said U.S. oil production was actually up by 115,000 barrels a day in February.

Until recently, crude futures had traded at about US$50 a barrel level. But the IEA warned that “behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.”

Meanwhile, traders looked ahead to the U.S. Federal Reserve’s meeting on interest rates last week.

There has been much talk about when the Fed will start to hike interest rates from near zero, where they have been since the 2008 financial collapse. A strong U.S. jobs report a week ago raised speculation the Fed could raise rates sooner than expected, perhaps as early as June. But a weak retail sales report Thursday raised doubts about that timetable.

Elsewhere on the economic front, the Russian Central Bank has cut its key interest rate by one percentage point to 14 per cent in an attempt to boost the struggling economy. The Central Bank predicts Russia’s gross domestic product will decline by between 3.5 and 4 per cent this year. The second interest rate cut in as many months continues the Central Bank’s reversal of the sharp overnight interest rate rise from 10.5 to 17 per cent that it carried out in December to preserve the value of the then-collapsing ruble.

Elsewhere on the commodity markets, April bullion was down 50 cents to US$1,151.40 an ounce while May copper was unchanged at US$2.66 a pound.