TORONTO -- The Canadian dollar tumbled to its lowest level in more than 18 months Friday as the U.S. dollar continued to appreciate.
The loonie was down for a sixth session, falling 0.76 of a cent to 95.64 cents US, its lowest close since late November 2011, amid data showing a disappointing read on Canadian retail sales and tame inflation. At one point during the session it was as low as 95.47 cents US, again the lowest since November 2011.
The real culprit was a stronger U.S. dollar, which has risen since Federal Reserve chairman Ben Bernanke said the bank is likely to start winding up monetary stimulus later this year.
He signalled Wednesday the Fed will begin to slow its bond purchases this year and end them in 2014 -- a sign the U.S. economy is getting strong enough to withdraw the stimulus program.
A weaker loonie tends to help sectors that sell Canadian goods and services to the United States but could make it more expensive for consumers to vacation or shop across the border.
The U.S. currency has strengthened as bond yields increased amid expectations the end is in sight for a Fed program known as quantitative easing, which stimulates the economy through bond purchases.
The yield on the U.S. benchmark 10-year bond hovered around 2.4 per cent Friday morning, up from about 2.25 per cent before Bernanke made his announcement Wednesday. The yield was as low as 1.6 per cent in early May.
The Fed's purchase of US$85 billion a month in bonds has kept long-term rates low and also helped fuel a strong rally on stock markets, the resource-heavy TSX being an exception.
Analysts suggested the loonie is in for further pressure in the short term.
"Typically, what we see in these broad periods of U.S. dollar strength is that they don't last forever, that they do last a few weeks," said Camilla Sutton of Scotia Capital.
"We have extreme dramatic moves, but then it takes a long, long time to retrace... so I would say that the Canadian dollar has weakened away from parity in the near term and (is) likely to still be weak when we look out in the next couple of weeks."
Statistics Canada said the annual inflation rate rose to 0.7 per cent in May while core inflation was stable at 1.1 per cent, both below expectations.
-- The Canadian Press