Loonie declines amid dropping copper and oil prices, positive U.S. jobless data
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Hey there, time traveller!
This article was published 09/05/2013 (4598 days ago), so information in it may no longer be current.
TORONTO – The Canadian dollar lost ground Thursday after enjoying a recent uptick from rising oil and gold prices.
The loonie was down 0.41 of a cent at 99.26 cents US.
The strength of the Canadian dollar — at times flirting with parity against the U.S. greenback this week — has been a sign of heightened investor appetite for risk amid optimism that the U.S. economic recovery is gaining momentum.
Andrew Pyle, a portfolio manager with Scotia McLeod, says he doesn’t expect it to hit that mark any time soon.
In fact, he is predicting the loonie will head downward with the upcoming instalment of Stephen Poloz as the new Bank of Canada governor next month.
“My take on this is that the new Bank of Canada governor will probably be more dovish on monetary policy and perhaps more sympathetic to the impact that a high Canadian dollar is having on exports and manufacturing,” said Pyle from Peterborough, Ont.
Poloz is leaving his job as head of Export Development Canada to take on his new role at the Bank of Canada.
Meanwhile, Pyle said it would not be unusual for the loonie to drop to 97 cents US or lower this summer.
“Keep in mind that fair value for the Canadian dollar is in the 92 to 93 cent range,” said Pyle.
“On that basis, we’re overvalued and if you have a central bank now that is going to be looking at that more urgently as a challenge for this economy as we go into the second half of the year, then the language could shift. It wouldn’t take much of a shift from the Bank of Canada to cause this currency to break down towards that 97 cent mark.”
That was echoed by TD Bank on Thursday, which forecast that the loonie is in for a rough ride this year despite its recent strength and could drop to as low as 90 cents US by the end of the year.
The bank cited weaker economic growth in Canada, the pull-back of commodity prices and the strengthening outlook for the U.S. greenback as all factors working against the loonie.
The dollar had been as high as $1.03 US as recently as September.
Meanwhile, commodities weakened after a flip-flop in prices through most of this week.
The June crude contract on the New York Mercantile Exchange fell 23 cents to US$96.39 a barrel.
July copper dipped three cents to US$3.34 a pound while June gold bullion was down US$5.10 to $1,468.60 an ounce.
Note to readers: This is a corrected story. An earlier version incorrectly had the loonie up.