Oil, loonie breach two bench­marks

Crude dips below $30 a bar­rel, loonie slips un­der 70-cent level

The Guardian (Charlottetown) - - BUSINESS - THE CANA­DIAN PRESS

Oil and the Cana­dian dol­lar breached two bench­marks Tues­day, with crude briefly dip­ping below US$30 a bar­rel and the loonie slip­ping be­neath the 70cent U.S. level dur­ing a volatile day on the mar­kets.

At one point in early af­ter­noon trad­ing, a bar­rel of West Texas In­ter­me­di­ate fell as low as US$29.93 be­fore it re­gained some ground to set­tle at US$30.44 a bar­rel. That was still down 97 cents from Mon­day’s close.

The Cana­dian dol­lar hov­ered above and below the 70-cent U.S. mark through­out the day, at one point drop­ping as low as 69.85 cents U.S., be­fore end­ing the day at 70.14 cents U.S. - down 0.17 of a cent and its low­est level since April 2003.

Oil prices have dropped pre­cip­i­tously over the last year and a half, fall­ing from above US$105 in June 2014 to lev­els not seen in more than a decade. And the loonie is heav­ily in­flu­enced by the global price of oil, one of the coun­try’s ma­jor ex­ports.

Sadiq Ada­tia, chief in­vest­ment of­fi­cer at Sun Life Global In­vest­ments, said the Bank of Canada is eye­ing the low price of oil as it con­sid­ers where to take its bench­mark in­ter­est rates af­ter cut­ting them twice last year.

“Ev­ery pass­ing day that oil drops, there’s more like­li­hood of a rate cut and more like­li­hood of more drops in the Cana­dian dol­lar,” he said.

At the same time the loonie has fallen, the green­back has surged against nu­mer­ous cur­ren­cies, in­clud­ing Canada’s, as its econ­omy gains strength.

Pa­trick Le­blond, an ex­pert in fi­nance at the Univer­sity of Ottawa, said re­cent volatil­ity in stock mar­kets around the world and global eco­nomic un­cer­tainty is caus­ing peo­ple to flee for the safe haven of U.S. Trea­sury bonds. That’s push­ing the value of the U.S. dol­lar higher, he said.

“The U.S. dol­lar be­comes a refuge, and that’s what we’ve seen in the last few days,” he said.

The fall­ing dol­lar and price of oil prompted ques­tions for Fi­nance Min­is­ter Bill Morneau, who was in Mon­treal on Tues­day for pre-bud­get con­sul­ta­tions.

“I know that Cana­di­ans are look­ing closely at the price of oil. Cana­di­ans are look­ing closely at the Cana­dian dol­lar,” Morneau said. “We rec­og­nize that those are im­por­tant in­di­ca­tors for Cana­di­ans as they go about con­sid­er­ing their sit­u­a­tion.”

The cur­rency’s his­toric low is 61.79 cents U.S., set in Jan­uary 2002.

It hit an all-time high of 110.3 cents U.S. in Novem­ber 2007 as Canada’s re­source-heavy econ­omy ben­e­fited from global de­mand for its ex­ports.

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