- Scrapped OPEC target spurs selloff in exporter currencies
- TD Bank sees Canadian dollar slide to C$1.40 as 'inevitable'
The Canadian dollar posted its biggest two-day drop since July against its U.S. counterpart, dragged down by plunging commodity prices.
The loonie reached an 11-year low for a second day as Bank of Canada Governor Stephen Poloz said the central bank still has tools to encourage economic growth. The currencies of oil-exporting nations have fallen since the Organization of Petroleum Exporting Countries effectively scrapped production targets at its Dec. 4 meeting, sending the raw material down to its 2009 low.
"It’s a bit of a perfect storm," said Mazen Issa, senior foreign-exchange strategist at Toronto-Dominion Bank in New York. "You have the collapse in commodity prices weighing on commodity currencies -- the Canadian dollar being one of them."
The Bank of Canada kept its key interest rate unchanged this month and said the economic recovery is unfolding as expected, with a weaker currency helping to contain the damage from lower oil prices. Morgan Stanley and Macquarie Group Ltd., both among the 10 most accurate currency forecasters, say policy makers will be disappointed.
Poloz said Tuesday that while he doesn’t expect to need unconventional measures to boost growth, charging banks for deposits, forward guidance and asset purchases are all options.
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell as much as 0.9 percent to C$1.3622 per U.S. dollar, the lowest since June 2004. It was at C$1.3585 at 5 p.m. in New York. One loonie buys 73.61 U.S. cents.
The currency has declined more than 14 percent this year as benchmark Brent crude fell 29 percent. The loonie’s already slumped past $1.34, the median year-end target of analysts surveyed by Bloomberg.
"It’s inevitable we’re going to hit C$1.40," Toronto-Dominion’s Issa said. "And certainly we’re going to persist around the low C$1.40 for an extended period of time." It last reached the C$1.40 level in May 2004.