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Largest Single Day CDN dollar loss since 60's
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You'd think that with the lower interest rate in the States the Canadian Loonie would fare better than what happened this week. Starting Wednesday th Loonie lost 2.19 cents and settled at 98.49 cents – its biggest one-day tumble since 1962. The loonie extended its losing streak on Thursday, hitting its lowest level in two months.
Behind the loonie's losses were falling commodity prices. Crude oil dropped below $100 a barrel (U.S.) Thursday, losing another $2.95 in early going. Oil hit a record high $111.80 on Monday.
Gold futures, which also touched a record high $1,032.70 an ounce on Monday, continued to plunge Thursday, trading as low as $905. Bullion has been steadily losing ground since Tuesday, when the U.S. Federal Reserve Board chopped its benchmark interest rate by three-quarters of a percentage point to 2.25 per cent. The U.S. central bank also suggested that it could cut again, as economic conditions deteriorate further.
The Fed took several other historic steps this week, including backstopping the sale of Bear Stearns Cos. Inc. to prevent its near collapse and making billions of dollars available to any other troubled investment dealers for the first time since the Great Depression.
The latest Fed measures came amid growing signs that the U.S. recession is headed for, or already in, an economic recession, one that is sure to spread its tentacles around the globe. The weakness in commodity prices is now threatening to put the brakes on Canada's resource-dependent economy.
The Bank of Canada's commodity price index has now dropped 10.9 per cent from its peak level in mid-March, he said. To put this in context, however, Canada's commodity prices had surged 25 per cent, year-to-date, from January through mid-March.
However, the trend lower in commodities continued to punish the Canadian dollar, which was down 0.98 of a cent to 97.51 cents US -- its lowest level since mid-January -- after tumbling 2.19 cents Wednesday.
Toronto's S&P/TSX composite index moved up 76.11 points to 12,785.49, after plunging 427 points Wednesday on sharply lower energy and metals stocks.
The TSX Venture Exchange was down 34.7 points to 2,450.29.
New York's Dow Jones industrial average was 137.18 points higher to 12,236.84, following a 293-point drop the day before, after the Philadelphia Federal Reserve said manufacturing activity is dropping less than it did in February, and by less than many economists anticipated.
However, the U.S. Labour Department said applications for jobless benefits totalled 378,000 last week, rising 22,000 from the previous week in a far bigger jump than had been expected.
The Nasdaq composite index gained 20.56 points to 2,230.52 while the S&P 500 index was up 14.79 at 1,313.21.
The financial sector has been improving for most of the week in the wake of the Bear Stearns buyout by JPMorgan Chase and a trio of better-than-expected earnings reports from three other U.S. investment banks.
The TSX energy sector was off early lows, up a slight 0.1 per cent as crude prices came off lows of the day where it fell below US$100 a barrel.
Late in the morning, the May contract for crude on the New York Mercantile Exchange moved down $1.30 to US$101.24 after sliding almost $5 Thursday on signs of lower U.S. demand. EnCana Corp. (TSX:ECA) moved down $1.34 to $71.96 and Suncor Energy (TSX:SU) fell $2.70 to $93.97.
Gold prices carried on declining after losing US$59 Thursday. The April bullion contract on the Nymex fell $20.90 to US$924.40 after going as low as US$904.70. The TSX gold sector retreated 1.85 per cent with Barrick Gold down $1.57 to $44.39.
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econmod
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Mar 20, 2008, 6:59 PM
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