TORONTO – The Canadian dollar closed sharply lower for a second session Friday even as economic growth for the third quarter came in much better than expected.
The loonie fell 0.84 to 87.41 cents US as Statistics Canada reported that third-quarter gross domestic product ran ahead at an annualized pace of 2.8 per cent, much higher than the 2.1 per cent rise that economists had expected.
On a monthly basis, the economy grew by 0.4 per cent in September.
The agency says the growth was mainly the result of exports and household spending.
However, the data wasn’t enough to lift the Canadian dollar. Like other commodity-based currencies, the loonie is getting hammered this week by a collapse in crude prices after the OPEC oil cartel opted to leave its daily output unchanged at 30 million barrels a day, rejecting intense lobbying by some of its 12 members to cut production to put a floor under prices.
Oil prices have plunged about 35 per cent from mid-summer highs because of a higher U.S. dollar, lower demand and most particularly, a glut of global supply.
Friday’s decline in the loonie followed a tumble of three-quarters of a cent on Thursday.
On Friday, the January crude contract on the New York Mercantile Exchange was down $7.54 from Wednesday’s closing price to a five-year low of US$66.15 a barrel. American markets had been closed Thursday for U.S. Thanksgiving.
Falling oil prices aren’t altogether bad — analysts point out that they are a net positive for world growth.
However, for oil producers like Canada, it weighs on trade and investment, which in turn depresses gross domestic product.
And “for currencies the reaction is clear, it adds upside risk to the U.S. dollar and downside risk to commodity currencies,” said Camilla Sutton, chief FX strategist and managing director at Scotiabank Global Banking and Markets.
The loonie also suffered from sliding metal prices.
March copper declined 11 cents to US$2.85 a pound. Copper hasn’t broken below $3 since 2010. The decision by China’s central bank to lower interest rates got a positive reception a week ago. But since then there have been concerns that the move isn’t enough to keep Chinese growth above seven per cent.
And gold prices were heavily punished since lower oil prices will translate into lower inflation. February bullion lost $22 to US$1,175.50 an ounce.