The loonie lost further ground on Wednesday, dropping to levels not seen in more than a decade as the price of oil came under pressure again and anxiety about the broader health of the Canadian economy persists.
The loonie shed nearly half a cent, hitting a multi-year low of 76.76 cents US. The last time the Canadian dollar traded at that level was September 2004.
The loonie sank below the 77 cent US level for the first time this decade on Monday. The dollar has been on a downward slide since last summer, when the price of oil started to weaken.
MORE: The plunging loonie — complete coverage
Driving the dollar lower on Wednesday were falling oil prices, which fell below the key psychological threshold of US$50 a barrel.
Rate cut
Compounding the loonie weakness was a decision by the Bank of Canada to cut its key interest rate last week. The central made the decision to cut rates to give the country’s ailing economy a shot in the arm.
“The Bank of Canada rate cut dealt a severe blow to the Canadian dollar and its outlook,” Rahim Madhavji, analyst at Knightsbridge Foreign Exchange, said.
Experts as well as the Bank of Canada itself believe economic growth contracted again in the second quarter, an outcome that would mean Canada has fallen into a mild recession.
The central bank’s overnight rate target stands at 0.5 per cent.
MORE: 3 reasons why gas prices are rising while oil tanks (again)
WATCH: The Bank of Canada has announced it’s cutting the key interest rate by another 0.25 percentage points in the hopes of giving the economy a boost. Jamie Sturgeon explains.
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