- Canadian dollar temporarily cracks 80-cent mark
- European stocks tumble
- New York poised to follow suit
- Australia's central bank cuts key rate
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The soaring loonie
The loonie temporarily shot through the 80-cent mark this morning, driven higher by a weaker U.S. dollar and raising questions about how much longer the Canadian currency can continue its sharp “winning streak.”
Having closed yesterday at 79.81 cents U.S., the loonie so far today has been as high as 80.25 cents and as low as 79.21 cents. It was sitting below the 80-cent level with a few hours still to go before North American markets open.
Canada’s dollar has rallied sharply since hitting a low near 68 cents in January, causing issues for exporters but no doubt raising the spirits of summer vacationers heading into holiday season.
Consider this: A morning cappucino at the Battery Park Ritz-Carlton’s 2West in New York costs a Canadian who converts cash about $10 today. That may be steep for a coffee, but consider that it cost around $11.75 in January.
So where does the loonie go from here?
Kit Juckes, the chief of foreign exchange at Société Générale, believes somewhere around 83.5 cents is reasonable, depending on oil prices and the outlook for the Federal Reserve’s key interest rate.
“That’s a realistic target, after which it gets slower,” Mr. Juckes said.
“But while the Fed’s on hold and oil’s not falling, there’s no great pressure to go back down.”
Jasper Lawler of CMC Markets in London also thinks somewhere above 83 cents is possible, depending on the run-up in oil, whose ups and downs have been moving commodity-based currencies for some time now.
“It’s been quite a winning streak,” he said.
But London Capital Group market analyst Ipek Ozkardeskaya isn’t so sure, citing questions about whether the oil market “may have gone well beyond itself.
A drop in oil prices, she added, could “compromise the loonie’s strength above the 80-cents mark.”
European stocks are tumbling so far, and it looks like New York will be following suit.
In Asia, Tokyo’s Nikkei was closed today, but Hong Kong’s Hang Seng lost 1.9 per cent while the Shanghai composite gained 1.9 per cent.
In Europe, London’s FTSE 100, Germany’s DAX and the Paris CAC 40 were down by between 1.1 and 1.7 per cent by about 7:15 a.m. ET.
New York futures were also down.
Encana posts loss
Encana Corp. posted a sharply narrower quarterly loss today, saying it’s still on track to “meet or beat” the targets it unveiled in February.
Encana’s first-quarter loss narrowed to $379-million from $1.7-billion a year earlier.
Other earnings reports are also flooding in today.
RBA cuts rate
Australia’s central bank trimmed its key rate today, driving the Aussie dollar into a tailspin.
The Reserve Bank of Australia’s benchmark rate now sits at 1.75 per cent, down by a quarter of a percentage point, after Governor Glenn Stevens cited low inflation.
The central bank, said chief analyst Michael Hewson of CMC Markets, is “the latest in a long line of central bankers to adopt the reflex reaction function of cutting rates due to lower prices, ignoring the possibility that in some cases these can be a good thing.”