TORONTO - The Canadian dollar fell more than a cent to well below 94 cents Friday, its lowest level in about a year, after oil prices continued to fall and a weak jobs report suggested the Canadian economy is slowing sharply.
The loonie traded on currency markets at 93.69 cents US, down 1.28 cents, hitting its lowest level since last August. Some analysts predict the loonie could fall further, especially if world oil price continue to drop.
Meanwhile, oil prices resumed their descent Friday, dropping below US$117 a barrel as a strengthening U.S. dollar and expectations of slowing demand offset supply concerns over a sabotaged pipeline in Turkey.
That compared with oil's all-time high above US$147 reached July 11.
Aron Gampel, Scotiabank's deputy chief economist, said the loonie has been sliding "quite significantly" over slumping commodity prices. But so have the currencies of Australia and New Zealand, two other so-called commodity countries that like Canada have benefited from the runup in prices of oil, metals, coal, grain and farm goods in the last year.
"We've seen a lot of the commodity based currencies suffer during this period of the sharp reverse of fortunes in the price of many sensitive commodity prices, mainly oil and natural gas," he said
"There's always volatility and this volatility is virtually unprecedented."
Investors, he said, "at least for the time being are reassessing their views of the global economy and that the slowdown in the U.S. is now taking more and more victims along with it."
Those victims, he said, "are increasingly not only America's largest trading partners close to home, Canada in particular, but also the developed world such as Europe."
A drop in commodities and the strengthening of the battered U.S. dollar have been pushing the loonie down all week.
For much of the last year, Canada, Australia and other so-called commodity countries have seen their currencies rise sharply because higher prices for oil, coal, metals and grains have made their resources economies among the strongest in the world.
However, there is growing belief that a slowdown in the United States, Europe and Asia will dampen demand for crude oil and other commodities and that's pulling down the commodity currencies.
"More and more investors are coming to the conclusion that this could be a much more protracted economic downturn than had originally been thought," said Gampel.
"Even Southeast Asian economies "are beginning to show some wear and tear around the edges."
In Canada, the national economy lost 55,000 jobs in July, with Quebec and Ontario, the country's two most populous provinces and the centre of the manufacturing sector, the hardest hit.
Statistics Canada said the national unemployment rate improved slightly to 6.1 per cent in July, from 6.2 per cent in June, but only because many people - especially the young - left the workforce.
The economy is clearly slowing, analysts said.
"The views that oil prices could only go onwards and upwards have been obviously turned around on expectations now that softer growth will result in some reduction in demand for commodities," said Gampel.
"At least temporarily this is a commodity play. Our currency is viewed as a proxy for commodity prices and oil is the bellwether here."
The price of crude oil, he said, "has turned the tide on the currency."
The Canadian dollar soared to more than $1.06 US earlier this year as currency traders flocked to the loonie amid a slump in the U.S. greenback and solid growth in Canadian GDP, especially in the resources-rich western provinces.
While the loonie's recent decline will make it more expensive for Canadians to take vacations to Disneyland and the sunny U.S. southern states, or import Florida oranges and California grapes, it will also benefit hard-pressed Canadian manufacturers who export to the U.S.
Canadian producers of everything from lumber and newsprint to machinery, plastic products and furniture have been hit hard by the slumping U.S. economy as well as the impact of a high dollar, which has made it more difficult to compete against U.S. and foreign rivals in the key American market.
Gampel said he's "sure not many people are going to be weeping about it. Maybe a lot of importers and cross-border shoppers are sort of crying today."
But many exporters, "who are obviously feeling the pain from the problems of the U.S. are breathing some relief because it will bolster some of their earnings outlook," he said.
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