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Briefing highlights

  • Canadian dollar to tumble, forecasters say
  • Value of currency deals swell in Canada
  • Enbridge in huge deal for Spectra
  • Bombardier cuts C Series delivery outlook
  • Video: Use of social media in the office

‘Immediate threat’

Currency forecasters expect the Canadian dollar to be hit on several fronts, possibly sending it tumbling by a few cents.

Now at about 78 cents (U.S.), the loonie could sink to the 75- or even 74-cent range within the next few months, according to both Bank of Nova Scotia and Canadian Imperial Bank of Commerce.

Scotiabank said in a fresh forecast it’s still looking at just shy of 77 cents by the end of this year, but that the “near-term risks” suggests the possibility of even lower.

Among the issues cited by Scotiabank strategist Shaun Osborne are the slump in the economy in the first half of the year. Exports have slumped by more than 5 per cent so far, and business investment is still suffering.

“Sluggish growth and weak exports suggest headwinds for the CAD in the next few months,” Mr. Osborne said in his report, referring to the loonie by its symbol.

“Renewed weakness in energy prices represents a more immediate threat to the CAD,” he added.

“Even if short-term market correlations between the CAD and crude oil prices have softened in recent weeks, the linkage remains positive.”

Oil prices had climbed sharply earlier in the year, but have recent softened again.

“The turn lower in crude - after a 20-per-cent rise in [West Texas intermediate] from the recent lows had speculators thinking in terms of a new ‘bull market’ - reflects the ongoing supply/demand imbalance that seems set to persist a little longer, especially while price discipline remains absent among producers,” Mr. Osborne said.

In the money

Currency is big business in Canada. Big, as in almost $86-billion (U.S.) a day.

According to a Bank of Canada survey done every three years, the average daily value of foreign-exchange transactions among financial institutions in the country swelled to $85.5-billion in April.

That represented a jump of almost 32 per cent from the $64.8-billion in the previous survey in 2013.

And if you want a sense of the stunning growth in this industry, consider that the average daily turnover was just $5.2-billion in the early 1980s.

The recently released survey results, unveiled alongside those of dozens of central banks as part of a broader Bank for International Settlements program, covered several types of deals, including spot transactions and swaps.

Fourteen financial institutions in Canada, accounting for an estimated 98 per cent of the business, were consulted.

The bigger report by the BIS, which pegged the daily average at $5.1-trillion globally, contained several notable tidbits where Canada is concerned:

While the daily average surged in Canada, it dipped globally.

Not only that, Canada now ranks as the world’s 11th largest foreign-exchange market, up from No. 12. And the Canadian dollar, capturing more than 5 per cent of the daily average, is the sixth most traded among world currencies.

“The main takeaway for me is that despite being the 11th biggest [foreign-exchange] market, the loonie is still one of the world’s most traded currencies,” Bipan Rai, executive director of macro strategy at CIBC World Markets, said of the findings.

“That indicates elevated foreign interest in Canadian assets. Part of the allure is Canada’s reputation as a stable place to invest, which improves the [Canadian dollar’s] liquidity.”

There’s more going on here, notably the impact of the oil shock, and the importance of crude to Canada.

“Domestic investors and companies likely ramped up hedging as a result, which led to increased activity,” Mr. Rai said.

“Nonetheless, Canada’s status as a currency hub has made strides, and with increased internationalization of the [Chinese yuan], there’s a very good chance that it will continue to grow in the coming years.”

Enbridge in Spectra deal

Canada’s Enbridge Inc. has struck a huge deal for Houston’s Spectra Energy Corp. that it says will create North America’s biggest oil and gas delivery system.

The all-stock deal values Spectra stock at about $37-billion, or $40.33 (U.S.) a share based on Enbridge’s closing price last week, the companies said.

“Over the last two years, we’ve been focused on identifying opportunities that would extend and diversify our asset base and sources of growth beyond 2019,” Enbridge chief executive officer Al Monaco said in a statement.

“We are accomplishing that goal by combining with the premier natural gas infrastructure company to create a true North American and global energy infrastructure leader.”

Union targets GM

Unifor has identified General Motors Corp. as the target for negotiations on a new contract, The Globe and Mail’s Greg Keenan reports.

If the union is able to negotiate a deal with GM, that agreement will serve as a template for negotiations with Ford Motor Co. and Fiat Chrysler Automobiles NV.

If the two sides are unable to reach a deal, the union will call a strike against GM on Sept. 19.

The key issue Unifor president Jerry Dias has laid on the negotiating table is investment at the company’s Canadian operations.

Bombardier cuts delivery forecast

Bombardier Inc. is scaling back its delivery forecast for its new C Series planes to 7 from 15 for the year as a result of engine-delivery delays by supplier Pratt & Whitney, The Globe and Mail’s Bertrand Marotte reports.

As a result of the halving of its delivery forecast for the C Series, Montreal-based Bombardier said it now anticipates being closer to the lower end of its $16.5-billion to $17.5-billion (U.S.) revenue guidance range for the year.

The free cash flow use guidance range has been adjusted to between $1.15-billion and $1.45-billion from $1-billion to $1.3-billion.

No reasons were provided for the engine delivery delay.

Video: Use of social media in the office

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