Dollar softens on falling oil prices, stock markets quiet

A pullback in the price of crude pushed the Canadian dollar lower Monday, prompting worries the currency may continue to face downward pressure if oil prices stay range bound this year.

The loonie, which was trading at its highest levels in nearly five months last week, started the week on the soft side, tumbling 0.35 of a U.S. cent to settle at 76.41 cents US.

A major contributor to the weakness was falling oil prices, as the March crude contract fell 82 cents at US$53.01 per barrel — with global supply and demand continuing to be in flux as effects of a cut imposed by OPEC and non-OPEC members take hold.

Craig Fehr, a Canadian markets strategist at Edward Jones in St. Louis, says he anticipates oil prices to stay range bound this year, which will likely pull the Canadian currency lower.

Another factor that will negatively influence the loonie will be the growing gap between interest rates in Canada and the U.S., he said, with assumptions being that growth will accelerate faster south of the border.

But a lower Canadian dollar isn’t necessarily bad news for everyone.

“To the extent that the loonie can stay low, stay where it is at the moment or move a bit lower, that provides a pretty powerful boost to the export output particularly when it’s combined with faster growth and higher demand out of the U.S.,’’ Fehr noted.

In other commodities, March natural gas was down a penny at US$3.05 per mmBTU, the April gold contract gained $11.30 at US$1,232.10 an ounce, and March copper was up four cents at US$2.65 a pound.

Meanwhile, stock markets on both sides of the border were quiet in the absence of any major economic releases or corporate earnings results.

In Toronto, the S&P/TSX composite index fell 19.45 points at 15,456.94, with the losses in energy partially offset by gains in gold and materials stocks.

On Wall Street, the Dow Jones industrial average dropped 19.04 points at 20,052.42, the S&P 500 slipped 4.86 points at 2,292.56, and the Nasdaq composite declined 3.22 points at 5,663.55.

“In the short term, day-to-day, it’s going to be more of what

“To the extent that the loonie can stay low, stay where it is at the moment or move a bit lower, that provides a pretty powerful boost to the export output particularly when it’s combined with faster growth and higher demand out of the U.S..” Craig Fehr

we’ve seen in the last week or two — up days followed by down days as we try to make sense of very solid fundamentals combined with what is an increasing amount of (U.S.) policy uncertainty in this environment,’’ said Fehr.

On Monday, nearly 100 tech companies announced they were pushing back in court against U.S. President Trump’s temporary travel ban, calling it unconstitutional, un-American and bad for the economy.

The companies filed briefs Sunday to back lawsuits from Washington state and Minnesota fighting Trump’s travel temporary ban. The ban keeps refugees and travellers from seven Muslim-majority countries from entering the U.S. for 90 days since being enacted Jan. 27. The 97 companies are mostly in the technology industry and include social media companies Facebook Inc. and Twitter Inc. Non-tech companies participating include yogurt maker Chobani and jeans-seller Levi Strauss & Co.