The loonie continued its long slide Wednesday, hitting a fresh four-year low against the U.S. dollar.
The Canadian dollar was trading at 92.58 cents after falling more than a cent Tuesday to its lowest close since late 2009.
The slide followed a spate of bad news about Canada’s economy. The Ivey Purchasing Managers Index, a measure of economic activity, came in much lower than expected for last month, at 46.3, compared to 53.7 the month before. A reading below 50 suggests economic contraction.
Canada’s trade deficit numbers also spooked the markets, with Statistics Canada reporting Tuesday that the country’s overall trade deficit with the world grew to $940 million in November as imports rose to $40.7 billion, while exports were unchanged at $39.8 billion.
The deficit came as the results for October were also revised to show a deficit of $908 million compared with an initial report of a surplus of $75 million for the month.
Meanwhile, U.S. economic data has been positive, further pressuring the loonie downwards.
Payroll firm ADP reported the U.S. private sector created 238,000 jobs during December. That data came two days before the release of the U.S. government’s employment report for last month. Economists expect it will show the economy created about 195,000 jobs in total.
International traders are certainly bearish on the Canadian dollar. The Globe and Mail reports the amount of money being placed in bets against the loonie is nearing extremes, with about US$5.5 billion currently invested against it.
Investment bank Goldman Sachs forecast late last year the Canadian dollar could hit 88 cents U.S. in 2014.
Meanwhile, Bank of Canada governor Stephen Poloz doesn’t appear in any hurry to raise the Bank of Canada’s trend-setting rate. In an interview on CBC on Tuesday, he denied he was under international pressure to raise rates.
Federal Finance Minister Jim Flaherty suggested in a recent interview that there would be such pressure as a result of Fed tapering.
Poloz did say that Fed tapering will inevitably put pressure on Canadian bond yields, likely leading to an increase in long-term fixed mortgage rates even if the Bank of Canada does not increase its benchmark rate.
— With files from The Canadian Press