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Canadian Dollar Falls to Lowest Since August 2007 on Trade |
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By Daniel Kruger
Sept. 11 (Bloomberg) -- The Canadian dollar fell to the lowest since August 2007 after a government report showed the nation's trade surplus shrank in July as crude oil prices declined during the month for the first time since March.
Demand for commodities, which account for about half of Canada's exports, has weakened with the slowdown in the global economy. The Canadian dollar has fallen 6.5 percent since July 11, when crude futures peaked at $147.27 a barrel. Oil has since plunged 32 percent, touching $100.10 today.
``Slower global growth should mean lower commodity prices, which is going to drag on the commodity currencies,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto.
The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, depreciated 0.7 percent to C$1.0788 per U.S. dollar at 2:47 p.m. in Toronto, from C$1.0713 yesterday. Earlier it fell as low as C$1.0821, the weakest since Aug. 16, 2007. One Canadian dollar buys 92.72 U.S. cents.
Canada's trade surplus for July narrowed to C$4.9 billion ($4.54 billion) from a revised C$5.6 billion the month before, Statistics Canada in Ottawa said. The median forecast of 17 economists in a Bloomberg News survey was for a surplus of C$5.6 billion.
The global economy may slow to about 3 percent growth in late 2008 from 5 percent in the previous year before re- accelerating toward 4 percent in 2009, said John Lipsky, first deputy managing director of the Washington-based International Monetary Fund, on Sept. 9.
`Cyclical Currency'
The Reuters/Jefferies CRB commodity index of 19 raw materials has fallen 25 percent since July 2.
The Canadian dollar is ``a cyclical currency, it's going to be motivated by the movements in the broader commodity markets,'' said Jack Spitz, director of foreign exchange at National Bank of Canada in Toronto. ``With gold and crude both trading down, there's going to be a filtration into bids for'' the U.S. dollar.
In an effort to bolster prices, the Organization of Petroleum Exporting Countries agreed at a meeting in Vienna yesterday to a total production limit for 11 members of 28.8 million barrels a day, unchanged from their previous targets. OPEC Secretary-General Abdalla El-Badri said an output cut of about 500,000 barrels a day would reduce a ``huge oversupply'' of oil on the market.
Gold fell 2.2 percent to $742.50 an ounce today. The metal has plunged 28 percent after it hit an all-time high of $1,033.90 on March 17.
Currency Forecast
The Canadian currency will fall to C$1.10 per U.S. dollar in the second quarter of 2009, according to a Bloomberg News survey of 34 firms.
The Canadian dollar's drop to a low of C$1.0821 earlier today opens up the possibility the currency may reach as low as C$1.10, Spitz said. The C$1.08 level represents a 61.8 percent retracement of the Canadian currency's rally to about 90.50 Canadian cents per U.S. dollar in November from almost C$1.1880 in February 2007, he said.
A close below C$1.08 would be a more definite sign, but the intraday move through that level wiped out some option barriers to the currency's depreciation, Spitz said.
The Bank of Canada left its benchmark interest rate unchanged at 3 percent on Sept. 3. The rate is ``appropriately accommodative,'' while inflationary pressures ``remain elevated,'' the central bank said. It didn't hint that slow economic growth may lead to a rate reduction. The next meeting is scheduled for Oct. 21.
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