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Canadian dollars, or loonies, sits on their American counterparts in this photo illustration. (Paul Chiasson/THE CANADIAN PRESS)
Canadian dollars, or loonies, sits on their American counterparts in this photo illustration. (Paul Chiasson/THE CANADIAN PRESS)

Business Briefing

Bank of Canada likely ‘incredibly uncomfortable’ as Canadian dollar hovers near 94¢ Add to ...

These are stories Report on Business is following Wednesday, July 2, 2014.

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Loonie at about 94 cents
The Canadian dollar sits at almost 94 cents U.S. today, no doubt causing the Bank of Canada some discomfort.

The loonie, as Canada’s dollar coin is known, has been making “slow daily gains,” driven most recently by a better outlook for global economic growth and, yesterday, a stronger reading of manufacturing in China, which supports commodity-based currencies, said Camilla Sutton of Bank of Nova Scotia.

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The dollar first hit the 94-cent mark yesterday, during the Canada Day holiday, and pushed higher today to reach 94.1 cents, before slipping to 93.76 cents by late afternoon.

Ms. Sutton, Scotiabank’s chief currency strategist, expects the loonie has further room to run, though that has to stop at some point.

“Is it sustainable that CAD sits at 94?” she said, referring to the currency by its symbol.

“It’s probably making the Bank of Canada incredibly uncomfortable, as well as exporters,” Ms. Sutton added, speculating that the central bank will cite the stronger currency in its next policy outing later this month.

The Bank of Canada under Governor Stephen Poloz is counting on stronger exports, which cost less in the U.S. market when the loonie declines.

Looking at it from the other side, the U.S. dollar against the loonie slipped to $1.063 in yesterday’s “holiday-thinned market and then broke through that level in the early London session this morning before encountering buyers,” said Gregory Anderson, Bank of Montreal’s global chief of foreign exchange strategy.

That $1.063, by the way, translates to 94.07 cents.

“I view any level below 1.0700 as an extreme bargain, but for the moment USDCAD is a falling knife and it is too early to try and grab it,” Mr. Anderson said.

“It needs to bounce first.”

There have been several developments over the past few days where the loonie’s concerned.

Last Friday, fresh numbers from the U.S. Commodity Futures Trading Commission showed speculators scrambling to cover their short positions in the loonie, positions that fell by about $1.5-billion to $500-million.

Then this week, data released by the International Monetary Fund highlighted the fact that the Canadian dollar remains the world’s fifth-biggest reserve currency, accounting for some $117-billion, or 1.8 per cent, of the allocated reserves of central banks.

Ms. Sutton sees this as a “long-term positive” for the loonie.

A look at currencies among the G10 countries, released yesterday by Société Générale, indicates the Canadian dollar tends to do well in the month of July, adding some pressure in advance of the next Bank of Canada meeting.

“The CAD has excelled in the G10 over the past month, posting its strongest three-week gain vs. the USD since September 2013,” said Société Générale’s Kenneth Broux, Carole Laulhere and Santosh Ejanthkar.

“This puts the currency in good stead to replicated the gains of previous years.”

IEA warns on energy drains
Those “smart” TVs and game consoles that keep you connected to a network are major energy hogs that drive global power demand – and greenhouse gas emissions – higher than they need to be.

Such network-connected devices consumed more than 600 terawatt hours of electricity worldwide in 2013, equivalent to the output of 200 medium-size coal-fired power plants and three times more than they would need if their manufacturers used best-available energy-saving technology, the International Energy Agency said in a report released today, The Globe and Mail's Shawn McCarthy reports.

“The proliferation of connected devices brings many benefits to the world, but right now the cost is far higher than it should be,” IEA executive director Maria van der Hoeven said on a conference call.

The devices, from smart TVs to set-top boxes to modems, consume power whether they are on or not, as they use standby power to remain connected to networks that allow instant access when they are turned on. But the Paris-based agency said the problem can be addressed even as consumers continue to enjoy the service they have come to expect.

ADP picture brighter
The economic picture is looking ever brighter for the United States.

The latest example came this morning with a private-sector look at the American jobs market.

That reading by ADP, a payroll processing company, suggested the U.S. private sector added a more-than-expected 281,000 jobs last month.

The government’s employment report comes tomorrow, and often differs markedly from the ADP measures.

Still, today’s ADP showing adds to a string of signals.

“The data so far for June have been very encouraging,” said senior economist Jennifer Lee of BMO Nesbitt Burns.

“ADP’s 281,000 jump, auto sales of 16.9 million (highest since January 2006), manufacturing ISM’s new orders at a six-month high … some regional PMIs holding steadyish … suggesting that the economy has shaken off the weak start to 2014.”

Labrador Iron halts operations
Low global iron ore prices and financing difficulties have forced Labrador Iron Mines Holdings Ltd. to suspend all operations at its mines for the year, The Globe and Mail's Bertrand Marotte reports.

The company said today it plans to focus in 2014 on developing its flagship Houston Mine, located near Schefferville in northern Quebec.

But Labrador Iron, a high-cost producer, said developing Houston is subject to completion of financing and the negotiation of major contracts.

The company also said it is seeking to cut costs by renegotiating agreements with contractors and suppliers.

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