Cana­dian dol­lar falls fur­ther af­ter big drop on Wed­nes­day, stock mar­kets up


The loonie con­tin­ued to slide on Thurs­day, reach­ing its low­est level since March 2009 af­ter los­ing more than a cent against the green­back fol­low­ing the Bank of Canada’s rate cut on Wed­nes­day.

The Cana­dian dol­lar de­clined 0.3 of a cent to close at 77.10 cents U.S. on the day af­ter the cen­tral bank cut a quar­ter-point from its bench- mark overnight lend­ing rate and slashed its out­look for eco­nomic growth.

Todd Mat­tina, chief economist and strate­gist at Macken­zie In­vest­ments, said the Cana­dian dol­lar could fall even lower if do­mes­tic growth con­tin­ues to be slug­gish.

He said the cen­tral bank could cut rates fur­ther later this year if the econ­omy con­tin­ues to stum­ble.

“There could be pres­sure, down­side risk in the growth out­look,” he said.

He said the Cana­dian cur­rency was also hit by tes­ti­mony from Fed­eral Re­serve chair­woman Janet Yellen in Washington in­di­cat­ing that the United States could be­gin to raise rates this fall, widen­ing the gap be­tween the two cur­ren­cies and mak­ing the Cana­dian dol­lar even less at­trac­tive for in­vestors search­ing for a re­turn.

The S&P/TSX com­pos­ite in­dex closed up 68.80 points to 14,731.08, build­ing on a 63point gain on Wed­nes­day.

Mat­tina said Cana­dian mar­kets have re­sponded pos­i­tively to the rate cut and signs of a re­cov­ery in the U.S.

The Dow Jones in­dus­trial av­er­age ended the day up 70.08 points at 18,120.25, the Nas­daq in­dex rose 64.24 points to 5,163.18, and the S&P 500 ad­vanced 16.89 points to 2,124.29.

The price of oil con­tin­ued to fall as the Au­gust crude con­tract closed down 50 cents to US$50.91 a bar­rel.

While eco­nomic growth seems likely to swing into the pos­i­tive in the sec­ond half of the year, the coun­try will be un­able to rely on a bounce back in energy prices, Mat­tina said.

Fu­tures traders aren’t ex­pect­ing a re­bound in the price of oil un­til 2017, Mat­tina said, which means Canada’s re­cov­ery needs to come from nonen­ergy in­dus­tries.

The price of oil has fallen by more than half since its peak in July 2014.

Mat­tina said there were a num­ber of is­sues driv­ing down the price of oil, in­clud­ing cool­ing de­mand in China, a slow­down in global growth and the deal on Iran’s nu­clear pro­gram that will open up that coun­try’s oil sup­ply to in­ter­na­tional trade.

“That weighs on an al­ready sup­ply-heavy oil mar­ket as de­mand is pres­sured,” he said.

On Wed­nes­day, Bank of Canada gover­nor Stephen Poloz said the poor per­for­mance of Cana­dian ex­ports over the first half of the year de­spite the weak dol­lar was “puz­zling.”

The Au­gust gold con­tract fell $3.50 to US$1,143.90 an ounce and the Au­gust con­tract for nat­u­ral gas was down 6.4 cents to US$2.85 per thou­sand cu­bic feet.

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