The Canadian dollar closed lower Tuesday, losing more than half a cent as crude oil prices moved well below the key US$50 a barrel mark.
The loonie was down 0.56 of a cent to 84.55 cents US as oil in New York fell $2.11 to US$47.93, the fourth straight day of declines and the lowest level since April 2009.
The drop reflected an unwillingness by traders to take on risky investments, including commodities, resource-based currencies and equities. Investors opted for safer trades such as gold and the U.S. dollar, which in turn sent the yield on the benchmark U.S. treasury to 1.95 per cent..
Oil prices have collapsed since June, falling 55 per cent amid a glut of supply. But demand has also softened amid slowing growth in China and Europe.
Elsewhere on commodity markets, metals were mixed as investors looking for safety pushed gold prices higher for a third day. February gold gained $15.40 to US$1,219.40 an ounce. March copper was unchanged at US$2.77 a pound.
Meanwhile, there was encouraging data from the world’s second-largest economy. The purchasing managers index from HSBC’s Chinese services sector unexpectedly showed expansion, rising 0.4 of a point to a three month high of 53.4. BMO Capital Markets also observed that “there were reports that China’s government gave the go ahead to proceed with US$1.1 trillion worth of infrastructure spending on 300 projects, to help boost growth.”
In the U.S., there was disappointing data covering factory orders and the American non-manufacturing sector.
U.S. factory orders moved down 0.7 per cent during November, versus the 0.5 per cent drop that economists expected.
And the Institute for Supply Management’s purchasing managers index for the American service sector fell to 56.2 during December, from a 59.3 reading the month before.
Traders also looked ahead to the latest employment data from Canada and the U.S. on Friday.
Economists expect that the American economy created about 240,000 jobs during December and that the jobless rate ticked slightly lower.
In Canada, it is expected Statistics Canada will report that the economy cranked out about 10,000 jobs, after losing a similar amount during November.