Canadian dollar closes below 70 cents US

Just before noon ET, it fell to 69.89 cents US, but it later bobbed back above 70 cents U.S.

Sid Mokhtari, a technical analyst at CIBC Capital Markets says he’s seen the relationship between plunging oil prices and the loonie grow stronger in recent weeks, a trend he believes could push the currency lower.

The February crude oil contract settled at US$30.44 a barrel, down 97 cents from Monday’s close, after dipping below US$30 in earlier trading.

Vancouver mining company Teck Resources credits the low Canadian dollar for helping the company weather the downturn in commodity prices, with the company able to sell its copper and coal at US prices while pay operating costs in Canadian.

Today the loonie dropped below 70 cents USA and chances are you’re already feeling its effects.

The global economy has started 2016 on a turbulent note, with economic woes in China, the world’s second-largest economy, hitting Canadian businesses and stock markets hard. Since then, most real estate markets in Canada have either stabilized and become balanced markets or, like the more oil-dependent cities like Calgary, Fort McMurray and Edmonton, experienced a housing price correction. The country imports about 80% of its fresh produce, so a fall in its currency translates to major sticker shock at greenmarkets and on supermarket store shelves.

Oil prices regressed $2.83 a barrel to $30.29 U.S. The Fed and the Bank of Canada are on divergent policy paths and Uncle Sam – Canuck bond spreads are the widest since 2007. The manufacturing sector can benefit in terms of their goods or their products appearing cheaper because they’re in Canadian dollars.

“The short answer is that it takes time for new sales to materialize, a lot of manufacturers don’t have a lot of extra capacity and few people are willing to make bets that the loonie will stay low for a long time”, Moffatt says.

The freshly-elected Trudeau government will unveil its first budget in the coming months, and it is expected to unveil aggressive new infrastructure spending and tax cuts that it hopes will kick-start investment.

“What we’re not seeing is the financial distress that we saw in 2008”, Alexander said.

Alan Arcand, associate director for the Conference Board of Canada’s Centre for Municipal Studies, said that, in a nutshell, a lower dollar helps exporters and it hurts importers. In fact, in 2015, the Bank of Canada cut its benchmark interest rate twice, trying to stimulate the economy. It lowered rates again in July to the current 0.5 per cent.