The Canadian dollar touched its lowest in more than five years as prices for crude oil dropped to levels that may endanger development of the nation’s largest export, and curb business investment.
The currency fell against most of its major peers as dimming prospects for global demand and surging oil supply pushed the price for the international benchmark of crude oil below $85 a barrel, the least in four years. That is below one estimated level needed to make some oil sands projects profitable, according to figures cited in a report yesterday from the International Energy Agency.
“It’s all tied into the meltdown we’re having in crude at the moment,” Bipan Rai, director of foreign-exchange strategy at CIBC World Markets Inc., said by phone from Toronto. “Being a commodity currency, being one of the major exporters of crude globally, our domestic currency is tied to that.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell as much as 0.8 percent to C$1.1385 per U.S. dollar, the lowest since July 2009, before closing little changed at C$1.1255 per U.S. dollar in Toronto. One loonie buys 88.85 U.S. cents.
Signs of slower growth in the U.S., the nation’s largest trading partner, helped to push yields on Canadian government bonds to the lowest levels since May 2013 before pulling back on speculation the route had been overdone.
Yields of Canadian 10-year benchmark bonds declined as much as 14 basis points to 1.8 percent, before closing almost unchanged at 1.94 percent. The 2.5 percent security due in June 2024 gained 21 cents to C$105.10.
Bonds rallied after a report showed U.S. retail sales dropped more than forecast in September. Debt pared gains as stocks trimmed losses after Bloomberg News reported Fed Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion during a closed-door meeting last weekend.
Federal fund futures show the probability of a September 2015 rate increase fell to 35 percent, down from 67 percent two months ago, according to data compiled by Bloomberg. The chances for an increase in December 2015 were 61 percent, making it the first instance for a likely central bank move.