Canada’s dollar has dipped below 70 cents U.S. for the first time in nearly 13 years as the price of oil — a key influence on the loonie — continues to drop.
The currency’s value fluctuates on a minute-by-minute basis but hit 69.92 cents U.S. about 20 minutes before noon ET. It was the first time the loonie was below 70 cents U.S. since April 2003, according to Bank of Canada data.
The currency has been sinking for some time as a result of lower oil prices and other factors and fell below 71 cents U.S. for the first time in more than a decade last Wednesday.
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Consumer impact
The currency’s sharp fall is impacting consumers in a variety of ways, from fanning prices higher at supermarkets, clothing stores, furniture shops and other retailers who import products, to dramatically curbing cross-border shopping trips.
Day trips into the United States this year are down 26 per cent, rivalling some of the sharpest drops on record. The loonie’s historic slide over the past year or so “has completely reversed the tide of cross-border shoppers,” Sal Guatieri, economist at Bank of Montreal, said in a recent research brief.
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Experts say, however, the country’s exporters stand to benefit from a cheaper loonie, which makes their products more competitive on the international market.
With the energy sector’s woes deepening and consumers looking increasingly tapped out, non-energy export industries are being banked on to drive economic growth over the next few years.
Domestic tourism and retailers also stand to reap some upside as the low dollar attracts tourists while convincing Canadians to travel and spend money within the country.
All about oil
The loonie is heavily influenced by the global price for oil, one of the country’s major exports. Crude oil fell briefly below US$30 a barrel on Tuesday, underscoring the market’s uncertainty that a global supply glut can be worked off any time soon.
Oil prices have declined precipitously since early fall 2014 as over-production sent global reserves soaring.
“Oil prices remain the primary risk for the Canadian dollar, as they remain precariously low,” Rahim Madhavji, currency strategist at Knightsbridge Foreign Exchange, said.
The loonie’s historic low is 61.79 cents U.S., set in January 2002. The currency’s all-time is 110.3 cents U.S. set in November 2007 as Canada’s resource-heavy economy benefited from global demand for commodity exports.
The last time Canada’s dollar was worth more than the greenback was about three years ago, in February 2013.
MORE: Latest coverage — plunging oil
WATCH: The decline of oil has been a crude reality for investors, and prices plummeted even further Monday. Shallima Maharaj reports.
— With files from The Canadian Press
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