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Canadian dollar loses another cent; North American stock markets pull back

TORONTO – Weak commodity prices continued to put pressure on the Canadian dollar Wednesday, as the loonie fell for a second day in a row, dropping almost a penny against the U.S. dollar.

The loonie lost 0.96 of a U.S. cent to close at 77.70 cents US, adding to a decline of 1.11 cents on Tuesday.

“Currencies tend to overshoot and undershoot,” said Laura Lau, a senior portfolio manager at Brompton Group.

The Canadian dollar dropped below 69 cents US in January and has topped 80 cents US in recent trading.

Lau said the volatility in the loonie has been a difficult factor for investors and companies to navigate, and will only stabilize once oil prices become more predictable.

“For instance, you really want a lower dollar to entice manufacturing capacity to come back to Canada, but anybody who tries to build a plant, they can’t build it on these fluctuations,” she said.

“You need time and a more stable currency.”

Lau noted that production shutdowns in the Alberta oilsands due to the wildfire in Fort McMurray have not affected overall oil prices for now because investors still view the moves as temporary.

Commodity prices were mixed Wednesday with the June contract for North American benchmark crude oil ahead for the first time in four days, adding 13 cents at US$43.73 per barrel. Crude has fallen sharply since trading at more than US$100 a barrel in 2014.

“In general, if there is any one commodity that you would link to global growth, it would be oil,” Lau said. “People tend to use that as a barometer for global growth. If the oil prices are doing well, sentiment is better and they think the economy is doing better.”

Sentiment is at a low because of the latest manufacturing figures released from China this week, which showed another contraction and spurred concerns over global growth.

In other commodities, June natural gas was up five cents at US$2.14 per mmBTU, while the June gold contract fell $17.40 to US$1,274.40 an ounce. July copper contracts were down three cents to US$2.19 a pound.

Gold, materials and mining stocks weighed on the S&P/TSX index, which pulled back 75.68 points at 13,632. The losses were partially offset by gains in the consumer staples, utilities and real estate sectors.

In New York, the Dow Jones industrial average fell 99.65 points at 17,651.26, while the broader S&P 500 lost 12.25 points at 2,051.12. The Nasdaq composite declined 37.58 points to 4,725.64.

Payroll processor ADP reported Wednesday that U.S. businesses added jobs at the weakest pace in three years last month.

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