C$ hits fresh 11-year low on oil slump

Tue Dec 8, 2015 5:20pm EST
 
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar weakened to a fresh 11-year low against the greenback on Tuesday, as a slump in crude oil prices to 2009 levels raised the prospect Canada's central bank might have to take further accommodative measures.

U.S. crude prices fell below $37 per barrel for the first time since early 2009 on fears global oil producers will pump even more crude in a battle for share in a saturated market.

"Oil spending time below $40 is shaking the foundations of the market," said Darcy Browne, managing director of foreign exchange sales at CIBC Capital Markets. "Whether it be people concerned for job cuts, are we going to start talking about rate cuts here, some form of QE (qualitative easing)."

The Bank of Canada cut rates twice this year to offset the oil price shock, and on Tuesday said it could push them into negative territory if warranted, but stressed it did not expect to use such unconventional monetary policy.

Meanwhile, the U.S. Federal Reserve is widely expected to hike rates for the first time in almost a decade later this month.

The Canadian dollar CAD=D4 settled at C$1.3587 to the greenback, or 73.60 U.S. cents, weaker than the Bank of Canada's official close of C$1.3513, or 74.00 U.S. cents.

In the two weeks to last Friday, the loonie had traded between C$1.3280 and C$1.3436.

The currency's strongest level of the session was C$1.3496, while it hit its weakest level since mid-2004 at C$1.3623.   Continued...

 
Canadian Loonies, otherwise known as a one dollar coin, are displayed on top of an American currency in this posed photograph in Toronto, October 10, 2008.    REUTERS/Mark Blinch