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Canadian dollar (Jonathan Haywa/The Canadian Pre)
Canadian dollar (Jonathan Haywa/The Canadian Pre)

Business Briefing

Seven reasons why the Canadian dollar may be bottoming out Add to ...

These are stories Report on Business is following Tuesday, March 4, 2014.

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

Has the loonie found bottom?
Economist David Rosenberg suggests today that the Canadian dollar may have found its bottom after its year-long slide.

Some observers see the currency going lower still, and it’s certain to have its ups and downs. But, the chief economist at Gluskin Sheff + Associates says, the loonie, as Canada’s dollar is known, “seems to have managed to find a bottom here” just above 90 cents U.S. That's where it sat late today.

As Mr. Rosenberg sees it, there are seven reasons:

1. Gold and energy are “back in a bull phase.”

2. Canadian stocks are “outperforming,” with foreign buyer near record levels.

3. Last week’s reading of fourth-quarter economic growth was higher than expected, at 2.9 per cent annualized. Without the December ice storm, it would have closed in on 3.5 per cent.

4. The factory sector may be “springing back,” based on the latest pick-up in Royal Bank of Canada manufacturing purchasing managers index.

5. Bank of Canada Governor Stephen Poloz has “stopped sounding ‘dovish,” seemingly comfortable with the current value of the dollar, while fears of deflation have eased.

6. In its latest budget, the Canadian government forecast a 93-cent dollar in 2014, with a rise to 95 cents next year.

7. The government posted a December surplus of $1.1-billion, wider than a year earlier, and  is on track for billions more “of black ink over the next half-decade which will be deployed in the form of tax reduction and selective infrastructure expenditures.”

The latest forecast for the Canadian dollar, from Canadian Imperial Bank of Commerce, suggests the loonie will rally.

While it could slip closer to 89 cents in the near term, CIBC said, the bank expects the currency to close out the year at almost 93 cents.

“Given diminished expectations of a cut in interest rates, the loonie now looks cheap compared with its recent relationship with yield spreads,” CIBC said.

The same with commodity prices, with the Bank of Canada’s commodity price index rebounding by about 7 per cent from a November low,” it added.

“And with the U.S. recovery likely to quicken again once the weather warms up, Canadian exports should benefit and shrink the trade deficit.”

Chrysler walks away from aid request
Chrysler Group LLC is abandoning its bid for funding from the federal and Ontario governments, The Globe and Mail's Adrian Morrow, Eric Atkins and Greg Keenan report.

The auto giant had asked for some $700-million in public funds to expand its operations in the province, most crucially at a minivan plant in Windsor. Chrysler had been willing to sink $3.6-billion into Windsor and Brampton, Ont.

But the company has now walked away from that request.

“It is clear to us that our projects were being used as a political football, a process that, in our view apart from being unnecessary and ill-advised, will ultimately not benefit Chrysler,” the auto maker said in a statement.

"As a result, Chrysler will deal in an unfettered fashion with its strategic alternatives regarding product development and allocation, and will fund out of its own resources whatever capital requirements the Canadian operations require."

Markets spring back
Global markets rallied today, but analysts warn investors not to be “naive” when it comes to the Ukrainian powder keg.

As our European correspondent Eric Reguly reports, stocks in Europe rebounded, and oil prices retreated, as Russian President Vladimir Putin raised hopes that the crisis is easing.

Separately, U.S. news groups reported, the United States offered loan guarantees to Ukraine of $1-billion (U.S.).

Market watchers say it’s just too early to tell.

“Live images across a number of news channels this morning have shown a furious showdown between Russian and Ukrainian soldiers in Crimea, with guns purposely pointed at opposing numbers while screaming at them to stand down,” said Toby Morris, senior sales trader at CMC Markets in London.

“This is no training drill, and politicians can paint a calmer picture to their hearts content, but we are still only one slip of a trigger away from a potential war, which is making today’s move look a bit naive to say the least,” he warned in a research note. 

“One thing is for sure, the rest of the week won’t be for the faint hearted, and investors will likely have to sift their way through waves of breaking news and rumours that will guide the markets for the next few days.”

Mr. Morris is not alone, and there are several factors to consider here.

“No, of course it’s not ‘all over,’” said Kit Juckes, the chief of foreign exchange at Société Générale.

“The economic fallout, notably in Russia, will be significant, and building political stability in the Ukraine remains a huge challenge,” Mr. Juckes said.

“But financial markets are short-sighted animals and everything is calmer.”

Enbridge to overhaul line
Enbridge Inc. plans to spend $7-billion overhauling a major pipeline from Alberta to Wisconsin, a project it calls the biggest in its history.

Enbridge announced late yesterday that the Line 3 replacement project will be done by the second half of 2017, and that it has the support of shippers for a surcharge, The Globe and Mail's Jeffrey Jones reports.

The project calls for new pipe “using the latest available high-strength steel and coating technology,” and will complement work already under way on the route.

The work, said chief executive officer Al Monaco, “will service to significantly extend our industry-leading earnings per share growth rate well beyond 2017.”

The company is providing more details this morning on a conference call with analysts.

Pension milestone
Canada has seen its first major pension “buyout” with an unidentified company purchasing about $500-million of annuities from an insurer to outsource the long-term funding obligation for its pension plan, The Globe and Mail's Janet McFarland reports.

Pension consulting firm Towers Watson revealed the transaction today, Canada’s first “jumbo” pension buyout occurred in the fourth quarter of 2013 and involved one of its clients.

In a pension buyout, an insurer essentially takes over the risk of funding a firm’s pension payments, typically by selling the firm annuities with guaranteed payout rates to match the pension payments. The company still has ultimate responsibility for the pension plan and remains the pension plan’s sponsor, and the deal does not affect the level of benefits owed or paid to retirees.

Scotiabank hikes dividend
Bank of Nova Scotia is the latest of Canada’s big banks to boost its dividend as it reports solid first-quarter results.

As The Globe and Mail’s Tim Kiladze reports, the last of the banks to report earnings hiked its quarterly dividend by 2 cents to 64 cents.

Scotiabank’s first-quarter profit rose to $1.7-billion or $1.32 a share.

The per-share profit amounts to $1.34 when one-time items are stripped out, in line with the estimates of analysts.

A bit shy? Here are the 10 best jobs for introverts
If you’re the type of person who takes to shouting across the office or otherwise thrives on being the centre of attention, these job categories aren’t for you.

But if you’re the type who could never be that other type, read on.

CareerCast today published a list of the 10 best jobs for introverts, and what they earn, based on U.S. government statistics.

It’s an American study. But the chances are pretty good that if you’re shy in the United States, you’re not going to be suddenly outgoing in Canada.

The CareerCast list for the shy:

Animal care and service worker, annual earnings between $19,970 (U.S.) and $25,270.
Archivist, $47,340.
Astronomer, $96,460.
Court reporter, $48,160.
Film/video editor, $51,300.
Financial clerk, $36,850.
Geoscientist, $90,890.
Industrial machine repairer, $46,920.
Medical records technician, $34,160.
Social media manager, $54.170.

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