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Canadian dollar sinks to 92¢ range (And just wait until Friday)

These are stories Report on Business is following Thursday, Jan. 9, 2014.

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Loonie sinks again
The Canadian dollar sank today to near the 92-cent mark, having bounced below and above that level, setting the stage for a potentially dramatic Friday morning.

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The depreciation of the loonie, as Canada's dollar coin is known, could accelerate tomorrow with reports on how both the U.S. and Canadian jobs markets fared in December.

The Bank of Canada is already seen as dovish, and a weak employment report could well heighten speculation of an interest rate cut, which would weigh on the currency.

In turn, a strong report on the U.S. jobs market could heighten expectations of a faster stimulus pullback by the Federal Reserve, in turn pushing up the U.S. dollar, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

Chief economist Douglas Porter of BMO Nesbitt Burns noted separately today how the loonie has moved in tandem with gold.

He pointed out that the loonie's erosion comes despite the fact that other Canadian commodity prices are above their levels of last year at this time.

"Oil has largely held its own and natural gas prices have roared back via the Polar Express," he noted.

"Curiously, however, the C$ has been closely tracking the steady sag in gold prices in the past year, a commodity that hasn't typically had a big pull on the C$," Mr. Porter added.

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"Factors that could be weighing on both are Fed tapering, the slow comeback in the U.S.$ and less demand for safety as financial markets heal. As well, extreme low inflation is crunching gold, and is also heating up talk of a [Bank of Canada] cut."

(For Mr. Porter's research, see the accompanying infographic or click here.)

Central banks hold firm
The European Central Bank kept benchmark interest rates on hold despite a deflation threat that triggered a cut late last year, our European correspondent Eric Reguly reports.

The central bank's holding pattern - its key rate stands at 0.25 per cent - widely expected and came shortly after the Bank of England kept its benchmark rate unchanged at 0.5 per cent and its asset-purchase program intact even though the British economy appears to be gaining strength by the day. Bank of England governor Mark Carney has said rates are unlikely to rise until the jobless rate drops to 7 per cent.

Economists believe another rate cut by the ECB is off the table for a while and that, if necessary, "non-standard" measures would be employed if the economic or banking markets were to suddenly deteriorate. These measures might include another round of liquidity injections into the banking system under the LTRO – long-term refinancing operation – last used two years ago in an attempt to end the credit crunch and keep banks lending.

Pension plans to see strong year
Canadian pension plans are facing another strong year in 2014 after all their "dreams came true" in 2013, according to a new forecast from pension consulting firm Mercer.

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Long-term bond yields are forecast to be flat in 2014, which will not help improve the funded status of pension plans, but most other assets classes are expected to post positive returns this year, giving a boost to pension funds' investment portfolios, according to the study reported by The Globe and Mail's Janet McFarland.

The anticipated strength would build on huge gains in 2013, when pension plans saw their returns soar and their funded status return to the highest level in 12 years

Housing starts, permits slip
Housing construction in Canada suffered something of a setback late last year, pointing to what economists expect will be a mild softening this year.

Housing starts slipped 4.1 per cent to an annual pace of 189,672 in December, Canada Mortgage and Housing Corp. said today, down from November's revised measure of 197,797.

Starts in cities fell more than 5 per cent.

"Adverse weather did not seem to put a dent in December," said chief economist Avery Shenfeld of CIBC World Markets.
"We're looking for a marginal further softening in 2014," he added.

This came amid a separate reading by Statistics Canada showing that building permits fell 6.7 per cent in November from October.

"Lower construction intentions, particularly for the residential sector in Quebec and Ontario, were behind the decline in November," the federal agency said.

At the same time, a new forecast by real estate firm Royal LePage projected the housing market will shift in favour of sellers to kick off the year, The Globe and Mail's Tara Perkins reports.

In brief
Canadian Natural Resources Ltd. says it's holding on to its Montney shale gas assets after all because an auction that started last year didn't yield a good enough price, despite high interest. Said the Canadian resource company: "None of the expressions were of sufficient merit to complete a transaction at this time, and as such, the company has elected to retain the acreage, maintaining one of the largest Montney land positions in Western Canada with over 1 million net acres."

Ford Motor Co. today hiked its first-quarter dividend by 25 per cent to 12.5 cents, citing a "strong" 2013. Said chief financial officer Bob Shanks: "This increase in the dividend provides our shareholders with a regular, growing dividend that we believe is sustainable over an economic or business cycle."

Jean Coutu Group (PJC) Inc. posted better-than-expected third-quarter profit of $62.5-million or 30 cents a share, though revenue dipped to $712.5-million. Chief executive officer François Coutu noted the "competitive environment and restrictive regulatory" environment.

China's annual inflation rate slowed in December to just 2.5 per cent, easing at a faster-than-expected pace. Said Mark Williams of Capital Economics in London: "It may rebound this month due to the usual price volatility around Chinese New Year but is likely to remain subdued over the medium term. Despite the benign inflation outlook, we expect policy to remain relatively tight to contain the structural risks from credit growth."

Goldcorp Inc. boosted its gold production for the year but reported a lower long-term outlook and said its key Penasquito mine in Mexico would only produce gold for 13 years instead of 19 years.

If you're happy and you know it ...
A new American study suggests bosses are far more satisfied than workers, and not just because of the pay.

Bosses are happier with their family lives, their current positions and their financial situations, according to the Pew Research Center survey, and are much more likely to think of it as a career rather than a job.

The highlights:

  • On family life, 83 per cent of bosses are “very satisfied,” compared to 74 per cent of workers.
  • As for their current job, it’s 69 per cent of bosses compared to 48 per cent.
  • Where personal finances are concerned, the difference is 40 per cent to 28 per cent.
  • Some 78 per cent of bosses think of their jobs as careers, compared to 44 per cent of workers.
  • More than 60 per cent of bosses believe they’re paid fairly, compared to 54 per cent.

One switch comes in the category of "currently looking for another job," where bosses stand at 12 per cent and workers at 23.

"Top managers with children also are less likely than other working parents to say parenthood has been an obstacle to job advancement," Rich Morin writes on the Pew website.

There is some agreement among the two groups. They're close on what's important: Work they like, job security and the need for time off for child care or family issues.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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