These are stories Report on Business is following Monday, Dec. 16, 2013.
Loonie under pressure
Bets against the Canadian dollar are surging, adding more pressure to a currency with an already weak outlook.
The latest figures from the U.S. Commodities Futures Trading Commission put the net short position against the Canadian dollar at $5.4-billion (U.S.), an increase of more than $1.5-billion from a week earlier.
“I think we’ve had sentiment turn against Canada quite aggressively in the past few weeks,” chief currency strategist Camilla Sutton of Bank of Nova Scotia said today.
The CFTC report, based on the levels of last Tuesday and reported on Friday, come amid a softer outlook for the loonie, as Canada’s dollar coin is known, among major forecasters.
The most extreme is the call by Goldman Sachs Group Inc. for an 88-cent loonie, while others are a few cents higher for the currency, which this morning stands at above 94 cents.
The latest CFTC reports puts the Canadian short position at its fattest since April, when the Canadian dollar was much stronger, and nearer to parity.
Various factors are at play here, including a central bank that is seen as increasingly dovish, the anticipated divergence of the Bank of Canada and its U.S. counterpart, and an economy that, while performing above expectations, is lagging that of the United States, Ms. Sutton said.
What she means by the second point is that the Federal Reserve is widely expected to begin cutting back, or “tapering” its $85-billion-a-month asset-buying program, a stimulus scheme known as quantitative easing, or QE.
At the same time, the Bank of Canada under Governor Stephen Poloz is deemed increasingly dovish, meaning easy money for even longer.
Or, as Ms. Sutton put it, the U.S. is nearing the peak of its monetary stimulus, while the Bank of Canada is not.
She’s not alone.
“I think that investors have started to warm up on the bearish Canadian theme encouraged by Poloz, a large consumer debt overhang, limitations in energy exports and the deflationary pains associated with being a satellite of what should eventually be a rising USD,” said Sébastien Galy of Société Générale, referring to the U.S. dollar by its symbol.
In a new forecast today, chief economist Douglas Porter of BMO Nesbitt Burns projected “further declines” for the loonie after its 7-per-cent erosion this year.
He cited the mixed forecasts for commodities, and a stronger U.S. dollar
“The currency has also been undercut by a dovish turn by the Bank of Canada, as well as an ebbing in the previous torrent of portfolio investment into Canadian bonds,” Mr. Porter said, projecting the dollar will sink to just below 91 cents by late 2014.
A weaker currency can mean many things, and is, of course, welcome news to exporters because it lowers the cost of what they sell to foreign buyers.
But it takes time for a weaker currency to ripple through to the exporting sector.
- Why Goldman Sachs recommends shorting the Canadian dollar
- Sophie Cousineau and Tavia Grant: Poloz takes a long view on inflation, dollar
- Scott Barlow in ROB Insight (for subscribers): Loonie’s worst days are likely over
- Brian Milner in ROB Insight (for subscribers): Fed’s finger on tapering trigger, but when will they pull it?
- Even David Rosenberg is ‘throwing in the towel’ on the Canadian dollar
- Is Bank of Canada trying to weaken Canadian dollar in a ‘stealth easing’?
- The eroding Canadian dollar: ‘It’s taken on a life of its own’
- Factory woes a bigger concern than housing and debt, BMO warns
Kinder Morgan files bid
Kinder Morgan Canada Inc.’s Trans Mountain project has filed an application to twin its existing oil pipeline from Edmonton to the Vancouver suburb of Burnaby, The Globe and Mail's Brent Jang reports.
The current pipeline stretches 1,150 kilometres, and plans call for a new $5.4-billion line that would boost total capacity to 890,000 barrels a day from 300,000 barrels a day.
More than 15,000 pages contained in 37 binders that stack up more than two metres high are in the massive filing to the National Energy Board, Calgary-based Kinder Morgan Canada said today.
Canada Post to seek concessions
Canada Post plans to push for more concessions from workers as it scrambles to fix its badly underfunded pension plan, chief executive Deepak Chopra says.
Making the $17-billion pension plan sustainable is now among his top priorities, Mr. Chopra said in his first interview since announcing a controversial batch of moves last week to stem mounting losses at the postal service, including the end of home delivery.
“Going forward, we see pensions as a major area of focus because the size of the deficits and the volatility is disproportionate to the size of the business,” he told The Globe and Mail's Barrie McKenna.
“We need to find sensible solutions that are consistent with the corporation’s ability to sustain the plan.”
Mr. Chopra, 50, who is nearly three years into a five-year term, would not confirm if those concessions would mean higher premiums, reduced benefits, or both.
Beale named Lloyd's CEO
Last week, Mary Barra became the first woman to head a major car company when she was named as chief of General Motors Co.
Today, Inga Beale was tapped as chief executive officer of Lloyd’s of London, becoming the first woman chief in a history that spans more than three centuries.
“Lloyd’s is already an international leader, but this unique market has an extraordinary opportunity to increase its footprint and to cement its position as the global hub for specialist insurance and reinsurance,” Ms. Beale said.
It’s interesting to note, by the way, that, despite the lower representation of women in Canadian corner offices and at the boardroom table, a majority of Canadians executives aren’t overly troubled, according to our latest C-Suite survey, reported by Richard Blackwell.
- Richard Blackwell: Most executives not concerned by number of women in boardroom
- Janet McFarland: Ottawa weighs new rules on executive compensation, director votes
Home sales climb
Canada’s housing market continues to show strength, defying some doom-and-gloom forecasts.
Home sales climbed 5.9 per cent in November from a year earlier, The Globe and Mail’s Tara Perkins reports, though the Canadian Real Estate Association acknowledged that year-ago figure was weak.
On a month-to-month basis, sales dipped 0.1 per cent.
The average sale price across the country rose 9.8 per cent from a year earlier, while the MLS home price index showed a gain of 4.1 per cent.
CREA also today updated its forecasts for this year and next, projecting that sales would climb by less than 1 per cent this year to 458,200 and by 3.7 per cent in 2014.
Average prices are now forecast to climb 5.2 per cent to $382,200 this year, and 2.3 per cent to $391,100 next year.
How we're feeling
A majority of Canadians don’t feel better off financially than last year, according to a new survey.
The poll by Sun Life Financial and Ipsos Reid found that 57 per cent of respondents say they aren’t in better shape than a year ago when it comes to their personal finances, The GLobe and Mail's Bertrand Marotte reports.
For the minority of those who said they are feeling better – 38 per cent – 65 per cent said they paid down household debt this year and 50 per cent said they make lump sum contributions and/or regular monthly additions to their RRSPs.
Streetwise (for subscribers)
ROB Insight (for subscribers)