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Canadian dollar plumbs new depths amid 'eye-watering' January free fall

These are stories Report on Business is following Wednesday, Jan. 15, 2014.

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Loonie briefly dips below 91¢
The Canadian dollar continued to plumb new depths today in what has been a free fall so far this year, though it perked up slightly this afternoon.

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The currency hit a low of 90.98 cents U.S. in the early hours, its lowest since 90.06 cents in September, 2009, before regaining ground and retaking the 91-cent mark. It stood at about 91.5 cents by midday.

The loonie, as Canada's dollar coin is known, has been losing ground for a year. That picked up speed as the new year dawned, driven lower by weak economic numbers and the dovish nature of the Bank of Canada under its new governor, Stephen Poloz.

"The speed of the move is eye-watering," said senior currency strategist Elsa Lignos of Royal Bank of Canada.

Two economic readings in particular – trade and jobs – hit the currency hard.

Today, however, the loonie's fading fortunes were more the result of a rally in the U.S. dollar, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

The Canadian dollar has lost some 3 per cent so far in January to become the weakest currency among the world's majors – next to the loonie is the Swiss franc, down 1.6 per cent - and the fifth-weakest in the world, Ms. Sutton noted.

"BoC Governor Poloz' great worry is inflation and on the back of that he continues to strike a CAD negative and dovish tone; while domestic releases have disappointed materially this year (trade, PMI, employment, etc.) and finally there has been no relief of the uncertainty surrounding the Canadian oil sector," said Ms. Sutton, referring to the loonie by its symbol.

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"Accordingly, CAD has been revalued by markets at a weaker level."

Thus, next week's meeting of the Bank of Canada and the release of its monetary policy report becomes a key "risk" for the currency, as does the Statistics Canada report on inflation later this month, as well as the Jan. 29 policy decision from the Federal Reserve.

The currency is ever more likely now to sink to the 90-cent level.

"Currencies do like to overshoot, and the trend is strong," Ms. Sutton said. "The risk of 90 is real."

While Canada's exporters obviously welcome a weaker currency, the central bank stresses it does not target that.

Some observers, however, think otherwise, which has raised speculation that the Bank of Canada could signal a cut in interest rates next week, which would nudge the loonie lower still.

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"Canada, like other commodity producers, is driving its currency lower to help rebalance its economy after over a decade of high [foreign exchange] levels and losses in productivity relative to the U.S.," Sébastien Galy of Société Générale said today.

Nordstrom heads north
Nordstrom Inc. is heading to the heart of Toronto.

The U.S. retailer announced plans today to begin building a 213,000 square foot shop in March, with the opening three-floor outlet set for the fall of 2016.

It will be at the Toronto Eaton Centre, a mall in the heart of Canada's biggest city. Sears Canada Inc. is leaving the location.

Nordstrom, which joins American retailers such as Target Corp. and Wal-Mart Stores Inc. in Canada, has already announced plans for five outlets, The Globe and Mail's Marina Strauss reports.

Cadillac Fairview, which owns the Eaton Centre, in turn named for what was once among the top retailers in Canada, says it has pumped $120-million into the mall over the past three years, and plans to put in $400-million more.

Magna slips
Magna International Inc. is warning that sales could come in shy of analysts' forecasts this year.

As The Globe and Mail's Bertrand Marotte reports, the Canadian auto parts giant said today it expects 2014 sales of $33.8-billion (U.S.) to $35.5-billion. That's below the $35.8-billion projected by analysts.

Magna also now projects sales of complete vehicles of between $2.6-billion and $2.9-billion, which would be below a revised 2013 forecast of $3-billion to $3.2-billion.

Osisko responds
Osisko Mining Corp. says it's going to continue to study a hostile bid from Goldcorp Inc., but left little uncertainty in a statement today:

"Osisko's board of directors noted that the 15-per-cent premium to Osisko's unaffected share price implied by Goldcorp's offer is very low and the price opportunistic in light of Osisko's proven high quality asset base. Osisko's board of directors remains committed to delivering superior value for shareholders and all stakeholders and will continue to pursue all initiatives to that end."

Goldcorp is bidding $2.6-billion or $5.95 a share in cash and stock.

Bank of America profit surges
Bank of America Corp. is flying higher.

The U.S. giant today posted a sharp rise in fourth-quarter profit to $3.4-billion (U.S.) or 29 cents a share, from $732-million or 3 cents a year earlier.

"We enter this year with one of the strongest balance sheets in our company's history," chief financial officer Bruce Thompson said in a statement.

"Capital and liquidity are at record levels, credit losses are at historic lows, our cost savings initiatives are on track and yielding significant savings, and our businesses are seeing good momentum."

Home sales climb
Canadian home sales closed out 2013 with a gain of 12.9 per cent in December from a year earlier, though a dip from November.

Sales across the country slipped 1.8 per cent from November, the Canadian Real Estate Association said today, for the third consecutive month-over-month decline.

The year-over-year gain was much stronger than expected among economists.

Sales are now 5.2 per cent below their September, 2013, peak.

"We'll likely continue getting mixed signals in the months ahead, with positive year-over-year comparisons for sales masking the recent moderation in the monthly sales trend," said CREA president Laura Leyser.

"As always, local housing market trends can be very different than national ones."

The average selling price in December rose 10.4 per cent from a year earlier, while the MLS home price index, which CREA deems a better measure, showed prices up 4.3 per cent.

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