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A Canadian dollar. (Jonathan Hayward/THE CANADIAN PRESS)
A Canadian dollar. (Jonathan Hayward/THE CANADIAN PRESS)

Business Briefing

Canadian dollar sinks fast, swings wildly Add to ...

These are stories Report on Business is following Friday, March 6, 2015.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Did you enjoy the 80-cent loonie while it lasted?
The loonie sank fast today, and swung wildly, in the wake of strong economic news from the United States and a weak showing in Canada.

The Canadian dollar touched a high of 80.28 cents U.S., and then a low of 79.21 cents. It was hovering just above that low point by late afternoon.

The combination of a strong U.S. jobs report and exceptionally weak Canadian trade reading sent the loonie tumbling, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

Other currencies fell by an even greater extent as the American employment reading sent the greenback up, suggesting the Federal Reserve will move quickly now to raise interest rates for the first time.

Ms. Sutton expects the loonie to sink further going forward, eventually hitting around the 75-cent mark.

“I think what we’re in the midst of is potentially the next leg higher for the U.S. dollar,” she said, citing the strength in the greenback, the disappointing Canadian data and oil prices “flirting with a break back below $50.”

The U.S. jobs market is on fire.

The economy churned out a much better-than-expected 295,000 jobs last month, and the unemployment rate eased to 5.5 per cent.

All of this, of course, is playing into the markets today and suggests the Federal Reserve won’t wait too long to unveil its first interest rate hike, possibly in June.

“This leaves it at the top end of the Fed’s 5.2-per-cent to 5.5-per-cent estimate of the natural rate,” said Paul Dales, senior U.S. economist at Capital Economics, referring to the jobless rate.

“In theory, when the unemployment rate is at the natural rate, interest rates should be at the neutral rate of between 3 per cent and 4 per cent,” he added.

“As such, this is quite a symbolic change that increases the pressure on the Fed to hike rates in June. Admittedly, the 0.1-per-cent month-over-month rise in hourly earnings pushed the annual growth rate back down to 2 per cent, from 2.2 per cent. But if the Fed waits until wage growth rising, they will be well behind the curve.”

In Canada, however, what we now have is the second-fattest trade shortfall on record.

Driven down by the oil crash and mining slump, exports tumbled by 2.8 per cent in January, Statistics Canada said today.

Imports were little changed, meaning the trade deficit swelled to $2.5-billion from December’s revised gap of $1.2-billion, The Globe and Mail's Luke Kawa reports.

Export prices fell 1.5 per cent on energy, while volumes slipped 1.3 per cent because of the mining sector.

Import prices inched up, while volumes dipped.

The January trade gap was the fattest since a July, 2012, record of $2.9-billion.

Canadian exports to the U.S. fell 3.1 per cent, and those to other countries by 1.9 per cent.

The slump in exports came from the oil patch. But if you strip out crude oil and bitumen, exports rose 0.2 per cent from December.

Total exports were up 3.4 per cent from a year earlier.

Mineral exports tumbled 8.6 per cent.

But cars and auto parts exports rose by 3.1 per cent.

Canadian manufacturers are supposed to be gaining from the weaker loonie, and have to some extent.

“Over the long run, there is evidence that Canadian manufacturers should benefit from a sustainably weaker currency, stronger U.S. demand, and lower energy prices,” said senior currency strategist Greg Moore of RBC Dominion Securities, who also projects the loonie will sink further to below 75 cents.

“And while we do expect that trend to gradually unfold, early signs feed the notion that they will take time to appear.”

Indeed, Mr. Moore said, the latest reading on Canada’s manufacturing sector, a Royal Bank of Canada measure that spelled trouble, there are “some early warning signs that the industry may actually be hurt by the sharp asset price moves initially.”

Wind wins new licences
Wind Mobile has won new licences for spectrum in Ontario, British Columbia and Alberta that will eventually give the company a path to building next generation networks, The Globe and Mail's Christine Dobby reports.

Federal Industry Minister James Moore announced the results at a press conference in Toronto today, revealing the auction for airwaves in the AWS-3 (advanced wireless services) frequency band raised a total of $2.11-billion.

Telus Corp., BCE Inc., Videotron Ltd. and Eastlink Wireless also won licences while Rogers Communications Inc. did not win any new spectrum.

The auction used a sealed bid, second-price format, which means each licence winner pays whatever the second-highest bid was or, if there was no other bidder, the amount of the reserve price Industry Canada set for the licence.

Kosher marijuana?
If my Bubbie were still alive, I’d try to get her some kosher pot.

My dear grandmother used to kvetch – complain – endlessly about anything and everything. Aches, pains. She used to read the death notices in the paper just to find someone she knew so she could cry about it.

But now comes word that some producers in the United States are seeking a kosher designation for some medical marijuana products.

We’re talking medical, not recreational, despite legalization of the latter in some states.

We’re also talking products, as opposed to the straight stuff.

“Nobody’s talking about smoking,” said Rabbi Moshe Elefant, the chief operating officer of the Orthodox Union’s Kashruth Department, which describes itself as the world’s biggest not-for-profit kosher certification agency.

Rabbi Elefant, whose group issues kosher certifications across the United States and in some 90 countries, including Canada, said he has been approached by three American companies looking to certify edible products, such as medical marijuana capsules and the like, in New York State, where he’s based.

There have been no decisions yet.

He wouldn’t identify the companies, but at least one is in Colorado, where recreational marijuana is legal.

Rabbi Elefant stressed that his group wouldn’t touch certification where recreational use is concerned. Indeed, it “would never even contemplate doing anything but medical.”

Not that it matters at this point because New York has yet to issue licences for medical marijuana.

But this is a growing industry, and the Colorado company, for example, has several operations in its home state. Because the stuff can’t be shipped cross-border, it and others would need to have factories in New York.

To be certified, every ingredient in a product must be examined to ensure there’s nothing non-kosher. And the facility in question must also be inspected on an ongoing basis.

This matters because of Jewish dietary laws.

Rabbi Elefant didn’t say this, but I can: It’s just under a month until Passover, when all the whacky mishpocha, or extended family members, come to pinch the cheeks of every kid at the seder table until they’re all red in the face.

(Just think of the possibilities: Please pass the matzoh. And those green things.)

Yes, this is serious stuff, and medical marijuana is a boon for suffering patients, but the New York Post may still have had the best line in referring to Yom Kippur and Rosh Hashanah: “The pot concoctions would give new meaning to the ‘high holidays’ if they are made available to New York Jews under a state law allowing medical marijuana.”

Permits tumble
The value of Canadian building permits is generally volatile. With that in mind, note today’s report from Statistics Canada that showed permits tumbling by 12.9 per cent to $6.1-billion in January.

That more than reversed December’s gain of 1.6 per cent, and was largely the result of weaker construction plans in Alberta, British Columbia and Ontario. And for non-residential work, at that.

Permits for multiple units, such as condominiums plunged 21 per cent, marking the fourth drop in a row.

CPPIB in U.K. deal
The Canada Pension Plan Investment Board is getting into the student dorm business in the U.K.

The CPP investment arm today unveiled a deal to buy Liberty Living from the Brandeaux Student Accommodation Fund.

The deal is worth some £1.1-billion, or more than $2-billion.

Liberty Living runs about 17,000 rooms in 17 university towns and cities in the U.K.

“This sector is an attractive one for CPPIB and we expect to see continued demand for well-located and well-managed student residences such as those within the Liberty Living portfolio,” Andrea Orlandi, who heads up CPPIB’s real estate investment group in Europe, said in a statement.

Do they know the term kegger in Britain?

Big Deals
Conservative sectors are now generating the biggest buzz on Bay Street in the wake of the oil crash, The Globe and Mail’s Tim Kiladze writes today.

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