The Canadian dollar closed down just over a full U.S. cent Thursday as oil prices plunged amid demand worries and volatility arising from tumbling silver prices.
The currency lost 1.05 of a cent to $1.0328 (U.S.)n adding up to a drop of almost two and a half cents this week as prices have also fallen sharply for gold and copper.
"We've seen extended moves in a lot of commodity markets and so today is a day of retracement and profit-taking," observed Scotia Capital chief currency strategist Camilla Sutton, adding that a big part of the story was also a stronger U.S. currency.
"The catalyst which started it is a combination of higher margins in silver prices and . . . some Asian central banks hiking rates, which raises worries that Asian growth could be slowing and should Asian growth slow, then it weighs on the outlooks for commodities."
The June crude contract on the New York Mercantile Exchange dropped $9.44 to $99.80 a barrel, down from a 2 1/2-year high above $114 late last week and its lowest level since mid-March.
Metal prices also retreated with the June gold contract on the Nymex down $33.90 at $1,481.40 an ounce. The June copper contract fell 14 cents to $4 a pound and the July silver contract in New York fell $3.15 to $36.24 an ounce.
Silver continued to plunge after the main U.S. metals exchange announced further hikes to margin requirements, or the money needed to be put up to trade the precious metal.
The latest hike amounts to an 84 per cent increase in margin requirements in two weeks by CME Group Ltd., spread over four separate changes.
Silver prices are down more than 20 per cent this week and analysts say volatility in the sector has spread to other areas since investors have been forced to sell other securities to meet higher margin calls. Silver had surged from under $31 an ounce late last year to almost $50 at the end of last week.
Analysts also pointed to signs that U.S economic growth is faltering for the slide in commodities, including a disappointing read on employment growth and much lower than expected expansion in the service sector.
And on Thursday, the U.S. Labour Department reported that claims for unemployment insurance surged to 474,000 last week from 431,000. The U.S. government is scheduled to announce April non-farm payroll numbers Friday.
Meanwhile, the European Central Bank left its key interest rate unchanged at 1.25 per cent after raising rates a quarter-point last month from the record low of one per cent. The bank also signalled that it won't raise interest rates as fast as the markets had been expecting.
The Bank of England announced it was keeping its key interest rate at a record low of 0.5 per cent amid sluggish economic growth and a surprise drop in the inflation rate.