Declining oil price beats down loonie
TORONTO — The loonie fell for a third consecutive day while the price of oil continued its slide, as uncertainty around U.S. President Donald Trump kept North American stock markets relatively flat Tuesday.
The Canadian dollar shed 0.46 of a U.S. cent to 75.95 cents US. It has lost 0.85 of a U.S. cent over the past three trading days.
Most strategists on the currency side have been surprised with the loonie’s strength, said Scott Vali, vice president of equities and a portfolio manager at CIBC Global Asset Management.
Last week, the Canadian dollar was trading at its highest levels in nearly five months. The commodity-sensitive loonie had been boosted by the price of oil, Vali said, rather than weakening on the strength of the greenback as some analysts have expected.
But the recent drop in oil prices has sent the loonie falling as well, said Vali.
The March crude contract was down 84 cents at $52.17 US per barrel, for a week’s loss of $1.66 so far.
It’s “a bit of a seasonal pause,” said Vali, as oil prices typically experience a weaker period from February through to March.
During that time, demand for refined product is weaker and refiners typically shut down for annual maintenance, he said.
But as demand picks up between April and June, Vali expects prices will as well.
Though, he added, that does somewhat depend on whether or not the members of the Organization of the Petroleum Exporting Countries are abiding by the oil production quotas they’ve put in place — a development the market is watching closely.
With lower oil prices, the energy sector on the Toronto Stock Exchange’s main index underperformed with stocks in the sector losing nearly one per cent of their worth on average.
Still, the S&P/TSX composite index gained 41.86 points to 15,498.80.
South of the border, stock indices made meagre advances.
The S&P 500 added just 0.52 of a point to 2,293.08 and the Dow Jones industrial average gained 37.87 points to 20,090.29. The Nasdaq composite reached a record-high, rising 10.67 points to 5,674.22.
Bay Street and Wall Street are taking a bit of a breather from their rally following the election of Trump.
The markets are questioning whether some of his recent moves, like an executive order imposing a 90-day travel ban into America on travellers from seven predominantly Muslim countries, will challenge the growth they’ve been anticipating during his tenure at the White House, Vali said.
Elsewhere in commodities, the April gold contract rose $4.00 to US$1,236.10 an ounce, March natural gas gained eight cents to US$3.13 per mmBTU, and March copper contracts fell around two cents to about US$2.63 a pound.