Canada’s dollar closed at the weakest level since 2009 as crude oil, the country’s largest export, slid to the least in two years and the central-bank governor said low interest rates were still needed to drive growth.
The currency fell against most of its major peers as the North American benchmark price for oil, which Canadian crude is priced against, dropped after Saudi Arabia reduced the cost to U.S. customers in the face of soaring North American output. Bank of Canada Governor Stephen Poloz reiterated today that falling oil prices would limit economic growth, saying Canada needs low interest rates to deal with the “headwinds” of a weak global economy in a speech in Toronto.
“Commodity prices are getting hit by the uncertainty in the global economic outlook,” David Watt, chief economist at the Canadian unit of HSBC Holdings Plc, said by phone from Toronto. “You’ve got the oil prices that took a big hit late this afternoon, which is certainly one of the factors that will weigh on the Canadian dollar.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, declined 0.8 percent to C$1.1359 at 5 p.m. in Toronto, the least on a closing basis since July 2009. One loonie buys 88.04 U.S. cents. Crude-oil futures fell as low as $78.08 per barrel in New York, the least since June 2012.
The central bank’s trend-setting interest rate has been 1 percent since September 2010. One reason for the prolonged recovery is what Poloz has called “serial disappointment” in global growth since the 2008 financial crisis.
The U.S. Federal Reserve, in contrast, ended a bond-buying program as scheduled last month and is now debating when to raise interest rates for the first time since 2006 as the world’s largest economy gathers momentum.
“The divergence of monetary policy is a driving influence behind currency movements,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said by e-mail from Toronto. “It’s of no surprise that the CAD is lagging.” Source: Bloomberg