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Canada's Dollar Falls Third Week as Oil Approaches 17-Month Low
By Haris Anwar
Nov. 18 (Bloomberg) -- Canada's dollar fell for the third straight week as commodity prices dropped and factory shipments declined at triple the rate economists expected.
Traders who analyze technical charts to make investment decisions said the currency's close weaker than C$1.1423 for the first time since April may signal further losses.
The oil tumble is ``undermining the Canadian dollar,'' said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York. ``The next week doesn't look to be a good one either because many people are calling for a bigger drop'' in the currency.
The currency dropped 1.3 percent this week to 87.20 U.S. cents. One U.S. dollar buys C$1.1468.
Canada's currency has fallen 3.9 percent since May 31, when it touched a 28-year high of 91.44 cents.
Crude oil fell to a 17-month low in New York this week as warm weather in the northern U.S. reduced fuel consumption and analysts questioned whether OPEC will cut output by 1.2 million barrels a day as it had pledged.
Commodities such as crude oil and natural gas account for 54 percent of Canadian exports. Oil for December delivery fell 0.8 percent at $55.81 a barrel on the New York Mercantile Exchange, the lowest close since June 15, 2005.
Copper Tumbles
Copper for delivery in three months dropped to a five- month low of $6,810 a ton on the London Metal Exchange as slowing industrial production in the U.S., the world's second-largest user of the metal, eased worries about tight supplies. Aluminum and other base metals also declined.
``The Canadian dollar is very vulnerable to the plunge in oil prices and the sell-off in base metals,'' said Monica Fan, head of currency strategy at RBC Capital Markets in London. ``The risk is that the Canadian dollar will overshoot a long-standing and non-consensus call for a move to C$1.1500.''
Lehman Brothers Holdings Inc. advised investors to sell the Canadian dollar as the growth outlook for the world's eighth-largest economy fades.
Factory shipments in September fell 3.3 percent to C$47.9 billion, the lowest since December 2004, Statistics Canada said Nov. 15.
The Bank of Canada kept its key interest rate unchanged at 4.25 percent for a third meeting last month and predicted growth will drop to 2.5 percent next year from 2.8 percent this year.
``We remain steadfast Canadian dollar bears,'' said David Mozina, a senior currency strategist at Lehman Brothers in New York, in an interview on Nov. 16. ``All the key fundamentals continue to lean on the currency -- deteriorating trade position, slowing growth and a more distant central bank.''
Lehman's Mozina recommended selling the Canadian currency against the U.S. dollar, Swedish krona, yen and Swiss franc. Fan of RBC Capital Markets suggested buying Australian and New Zealand dollars against the Canadian currency.
The yield on Canada's benchmark 10-year bond was little changed this week at 4 percent. The price of the 4 percent bond due June 2016 rose 1 cent to C$99.98. Bond yields move inversely to prices.