Go to the Globe and Mail homepage

Jump to main navigationJump to main content

(HASAN JAMALI/Hasan Jamali/AP)
(HASAN JAMALI/Hasan Jamali/AP)

Dollar drops as oil price swoons Add to ...

The Canadian dollar closed lower against the U.S. currency Wednesday as worries about a deeper economic slowdown in China and signs of lower U.S. crude demand helped spark a selloff of commodities and strengthen the greenback.

The loonie fell 0.37 of a cent to $1.0405 (U.S.) after earlier running as high as $1.0512.

The dollar was earlier supported by data showing that Canada's trade surplus rose sharply in March. The surplus came in at $627-million (Canadian), up from $356-million in February as exports increased 3.5 per cent and imports grew 2.8 per cent.

The June crude contract on the New York Mercantile Exchange fell $5.67 (U.S.) to $98.21 a barrel after the Energy Information Administration said that crude inventories rose 3.8 million barrels last week, much more than the increase of 1.6 million barrels that analysts expected. Also, gasoline inventories unexpectedly rose, which sent the June gasoline contract down 26 cents to $3.12 a gallon.

Prices were also under pressure after the U.S. Energy Department's Energy Information Administration said it now expects demand for oil to grow by 1.4 million barrels a day in 2011, about 120,000 barrels a day less than it forecast a month ago.

Also roiling energy markets was a move by CME Group to raise daily trading limits for certain energy contracts. The main energy market earlier briefly halted trading in oil, heating-oil and gasoline futures on the New York Mercantile Exchange after the June gasoline contract hit its daily price limit. The CME also boosted daily price limits for crude oil to $20 and for heating oil and gasoline to 50 cents.

Meanwhile, the Chinese government released data showing inflation remains stubbornly high while industrial output dropped more than expected in April.

Chinese consumer prices rose 5.3 per cent over a year earlier, driven by an 11.5 per cent jump in food costs and higher than the government's 4 per cent target for the year "and that increases the likelihood of more interest rate increases and slowing the Chinese economy," observed Jeff Bradacs, senior investment analyst at Manulife Asset Management.

Also, growth in China's industrial output eased in April, declining from March's 14.8 per cent to 13.4 per cent, below the 14.5 per cent reading that economists expected.

Worries about a deepening slowdown in China helped push the July copper contract on the Nymex down 13 cents to $3.91 a pound. China is the world's biggest consumer of the metal.

Bullion prices were also lower, with the June gold contract in New York down $15.50 to $1,501.40 an ounce.

Report Typo/Error

Follow us on Twitter: @GlobeBusiness


Next story


In the know

The Globe Recommends


Most popular videos »


More from The Globe and Mail

Most popular