TORONTO – The Canadian dollar closed near a two-year low Monday as it felt the impact of lower prices for key commodities, particularly gold and crude oil.
The loonie was down 0.18 of a cent at 93.98 cents US, just shy of its close of 93.93 cents US on June 30, 2010.
Jennifer Dowty, an associate portfolio manager with CIBC Global Asset Management, said the dollar is feeling pressure as a result of dropping commodity prices.
February bullion fell $28.50 to US$1,221.90 an ounce, while March copper fell two cents to US$3.18 a pound.
Dowty forecasts this weakness will likely continue.
“The U.S. economy is steadily recovering and gold, being a safe haven, is not a place that investors need to be right now,” she said. “You’re seeing pressure on gold.”
Crude prices saw an uptick Monday after having lost ground over the past week due to concerns over rising supplies. The January crude contract on the New York Mercantile Exchange climbed $1.10 to US$93.82 a barrel
“There is a high correlation between the price of oil and the Canadian dollar,” said Dowty. “A weakness in crude has been reflected in the Canadian dollar.”
Meanwhile, new figures indicated signs of continued economic recovery in the United States.
The Institute for Supply Management says its index on U.S. manufacturing activity rose in November to 57.3 as factories increased production and hiring. That was up from 56.4 in October and the highest since April 2011. A reading above 50 indicates growth.
Data from China was also positive as the HSBC purchasing manager’s index came in at 50.8 in November. That was down slightly from 50.9 in October but still the second-highest level in eight months and an improvement from a preliminary reading of 50.4 released earlier last month. Typically, numbers above 50 indicate an expansion.
A day earlier, the China Federation of Logistics and Purchasing said its PMI remained at 51.4, the same as October.
This week, attention will turn to the Bank of Canada, which will announce Wednesday whether its trend-setting rate will remain at one per cent, where it’s been since late 2010.
Many analysts don’t think the central bank will start raising rates until 2015 and some even think it could be persuaded to cut the overnight lending rate if inflation gets too low or the economy stalls.
Speculation about a cut gained momentum after the bank’s last announcement Oct. 23 when it dropped its warning about the potential for higher interest rates.