Crude oil and the Canadian dollar breached two benchmarks Tuesday, with oil briefly dipping below US$30 a barrel and the loonie slipping beneath the 70-cent USA level.
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Toronto’s main stock index has plunged to its lowest in about three years, while the loonie has dropped to its lowest against the dollar in more than a decade.
Craig Jerusalim, portfolio manager at CIBC Asset Management, said that while the declining oil price has dragged down the loonie, the currency’s weakness over the past month is due more to the widening gap in monetary policy between Canada and the United States.
Like oil, the currency’s value fluctuates on a second-by-second basis but fell to 69.89 cents US before noon ET.
“As long as the expectations are that the Bank of Canada is going to cut while the Fed is going to raise interest rates, the Canadian dollar could overshoot on the downside”, Jerusalim said.
On commodity markets, the see-sawing February contract for West Texas Intermediate crude oil was down 11 cents at US$30.33 a barrel as the North American benchmark continued to test the US$30 mark.
Patrick Leblond, an expert in finance at the University of Ottawa, said recent volatility in stock markets around the world and global economic uncertainty is causing people to flee for the safe haven of U.S. Treasury bonds.
The Dow Jones average of 30 stocks was down 27.84 points at 16,123.57, the broader S&P 500 index declined 6.6 points to 1,883.68 and the Nasdaq 100 lost 36.4 points to 4,146.71.
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The S&P/TSX composite index added 54.65 points to end the day at 12,373.90, its first positive result since the Christmas break.
