BLBG: Canadian Dollar Falls as Drop in Oil Reduces Currency’s Appeal
Canada’s dollar dropped against all of the other major currencies as crude oil prices fell back below $40 a barrel.
The currency depreciated the most versus its U.S. counterpart in more than a week, extending its annual decline to 19 percent, the biggest on record. Crude oil is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.
“The pullback in oil prices is weighing on the Canadian dollar heavily,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
The Canadian dollar lost 0.6 percent to C$1.2283 per U.S. dollar at 10:15 a.m. in Toronto, from C$1.2205 yesterday. One Canadian dollar buys 81.41 U.S. cents. The loonie, as the currency is known, dropped as much as 1.1 percent, the biggest intraday decline since Dec. 19.
The currency fell this year as the global recession cut demand for commodities, which account for about half of Canada’s export revenue.
Canada’s currency may extend its decline as tumbling oil prices hobble foreign investment in the country’s oil patch, according to the world’s biggest strategists and economists.
The current-account surplus, the broadest measure of trade, will turn into a deficit in 2009, said Toronto-based Scotia Capital Inc., a unit of Canada’s third-biggest bank.
Crude oil for February delivery fell as much as 2.4 percent to $39.08 a barrel in electronic trading on the New York Mercantile Exchange on speculation fuel stockpiles may increase as the deepening global recession reduces demand.
The yield on the two-year Canadian government bond gained one basis point, or 0.01 percentage point, to 1.12 percent. It reached 1.045 percent yesterday, the lowest level since at least 1989, when Bloomberg records begin. The price of the 2.75 percent security due in December 2010 fell 3 cents to C$103.09.
