Loonie drops again amid uptick in joblessness
Canadian dollar now well below 92 cents US due to job losses
The Canadian dollar dropped sharply Friday, falling to well below 92 cents US amid disappointing jobs numbers.
It fell to below 91.36 cents in morning trading before recovering to close at 91.72. Yesterday’s close was 92.20 cents.
The loonie is down 2.3 cents from last Friday. It last had parity with the U.S. dollar in February 2013.
Part of the shock was caused by the news that the economy shed 45,900 jobs in December, many more than analysts had predicted. The joblessness rate in Canada climbed to 7.2 per cent in December, up from 6.9 per cent in November.
U.S. job creation numbers were also lacklustre, indicating the U.S. recovery may not be as vibrant as hoped.
However, there is enough confidence in the U.S. economy that the American dollar is rising against most major currencies.
“I don't think it's just a Canadian dollar story — it is partly a U.S. dollar story,” said RBC chief economist Craig Wright.
“The U.S. outlook, notwithstanding the employment numbers, is looking better. The Fed has moved towards tapering which looks like growth that has helped the U.S. dollar gained ground against a number of currencies,” he told CBC News.
The Fed decision to reduce its monthly bond-buying program in January to $75 billion US from $85 billion has led to expectations of further reductions in Fed stimulus throughout the year.
At the same time, Canadian growth is more modest than expected, with the Bank of Canada lowering its forecasts for economic growth in the second half of 2013 and early 2014 because of poor export performance and a more prudent consumer.
Wright said there is chance the Bank of Canada may cut rates rather than raising rates which was the consensus a short while ago.