The Canadian dollar dropped to levels not seen in more than a decade as the economy continues to exhibit recessionary symptoms while the price of oil, gold and other commodities which propped up the loonies’ value fell.
The loonie went down to $76.76 to a greenback, down $0.47 cents, the lowest since September 2004.
The dollar earlier rose in value in 2002 when the price of oil was high since the loonie is now considered a petro-currency. When the price of oil started plummeting last year so did the loonie.
Canada’s currency soared to US$2.78 when the US temporarily abandoned the gold standard. Its highest post Confederation level was on November 7, 2007 when the loonie reached a high of US$1.0614.
With the dollar’s long slide in the 1990s, the loonie steadily slumped in value against the US dollar. On January 21, 2002, it traded for as little as US$0.6179 before high oil prices buoyed it up once more.
On September 28, 2007, it closed above the American dollar for the first time in 30 years.
“As long as oil exports remain a strong component of Canada’s exports, oil price will influence the value of the Canadian dollar,” said Werner Antweller of the Sauder School of Business at University of British Columbia.
The dollar dropped in value since summer when the price of oil weakened. It fell some more when the Central Bank cut interest rates in a bid to stimulate economic activity.
The action, however, were opposed by the Harper government who opted for a policy of a balanced budget by ravaging surpluses in the Employment Insurance account and selling government shares at General Motors.
Harper and his economic managers also opposed any stimulus spending opting instead to distribute $3 billion worth child care benefits.
Meanwhile, the Parliamentary Budget Officer foresees a federal deficit in its update to the spring budget.
New projections by the Central Bank suggest the federal government budget won’t balance this year as it is on track to run a deficit of over $1 billion for 2015-2016.
The result of the calculations based on the downgraded calculations released by the CB Wednesday points to a bleaker outlook and will further trim expected surpluses touted by the governing Conservatives in the next two years.
The Central Bank said the budget will fall into a $1 billion deficit for 2015-2016.
In its April budget the Conservatives deceptively predicted a string of surpluses, starting with $1.4 billion for this election year. The Conservatives also forecast surpluses of $1.7 billion in 2016-17 and $2.6 billion in 2017-18.
The fresh calculations by the Bank of Canada also lowered growth prospects to a mere 1.1 percent in line with similar projections by the International Monetary Fund (IMF).
Canada’s economy contracted by 0.6 percent in the first quarter. CB data also showed another contraction from April to June by 0.5 percent leading economist to believe the country is in technical recession. A recession is defined as two consecutive quarters of contraction.
The Conservatives earlier predicted that real gross domestic product will grow by 1.2 percent for the first three months of 2015. It turned out to be a pie-in-sky projections.
The Conservatives placed their entire program on a balanced budget while slashing services to Canadians. They were also cutting up jobs in the federal sector to balance the budget.
