TORONTO – Oil and the Canadian dollar breached two benchmarks Tuesday, with crude briefly dipping below US$30 a barrel and the loonie slipping beneath the 70-cent 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.
The last time Canada’s dollar was worth more than the greenback was about three years ago, in February 2013.
If there was one bright spot Tuesday, it was the S&P/TSX composite index, which added 54.65 points to end the day at 12,373.90 — its first positive result since the Christmas break.
In New York, the Dow Jones rose 117.65 points to close at 16,516.22, the S&P 500 index added 15.01 points to 1,938.68, and the Nasdaq rose 47.93 points to close at 4,685.92.
In other commodities, the February contract for gold fell $11 to settle at US$1,085.20 an ounce while February natural gas fell 13.9 cents to US$2.257 per mmBtu.