WATCH: The price of oil dropped to its lowest in five years on Thursday, below US $60 for a barrel of crude. That brought the value of the Canadian dollar below US $0.87. Reid Feist reports on how energy companies are facing a harsh new reality.
TORONTO – The Canadian dollar closed at a 5 1/2-year low Thursday amid declining prices for oil and gold and a greenback that strengthened following a solid U.S. retail sales report.
The loonie slipped 0.36 of a cent to 86.75 cents US.
U.S. retail sales perked up in November with the start of the holiday shopping season, rising 0.7 per cent, led by online buying and purchases of autos, clothing and electronics.
Oil prices fell below US$60 to a fresh five-year low on top of a $3 slide Wednesday after OPEC cut its forecast for global demand for the cartel’s oil. On Thursday, the January crude contract on the New York Mercantile Exchange dropped 99 cents to US$59.95 a barrel.
Metal prices were mixed with February gold bullion down $3.80 to US$1,225.60 an ounce while March copper edged up three cents at US$2.92 a pound.
The Canadian dollar has moved steadily lower in recent weeks as traders try to assess the damage that will be caused to the Canadian economy by oil prices that have fallen about 40 per cent since the summer. The fall has been sparked by lower demand prospects and an over-abundance of crude oil, thanks in large part to surging shale production in the U.S. and a refusal by OPEC to cut production to support prices.
“Oil prices reached fresh lows . . . in a relentless drop, which will weigh on domestic growth,” said Camilla Sutton, chief FX strategist, managing director, Scotiabank Global Banking and Markets.
“Canadian equities continue to underperform, warning that there is likely domestic and foreign selling, and therefore selling of the Canadian dollar.”
Sutton added in a commentary that she expects weakness in the Canadian dollar to carry on into 2015.
Also pressuring the loonie are questions about whether economic weakness due to falling oil will see the Bank of Canada putting off rate hikes even further. Economists have been looking for the bank to move late next year.
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