The Peak Oil Myth

[ThatHawaiiGuy]

Canada’s Dollar Drops as U.S. Currency Climbs, Crude Oil Slumps

http://www.bloomberg.com/apps/news?pid=20601082&sid=a8T7Ae3AdY3o&refer=canada

By Chris Fournier

Dec. 12 (Bloomberg) -- Canada’s currency fell for the first time in three days after the U.S. Senate blocked a bailout for General Motors Corp. and Chrysler LLC, pushing the U.S. currency higher and crude oil back below $45 a barrel.

“News about the automakers is not good for Canada or for the Canadian dollar,” said Aaron Fennell, a Toronto-based futures and currency broker at MF Global Canada Co., a unit of MF Global Ltd., the world’s largest broker of exchange-traded futures and options. “If we’re not selling goods to the U.S., that undermines the value of the Canadian dollar.”

The Canadian dollar fell 1 percent to C$1.2488 per U.S. dollar at 4:48 p.m. in Toronto, from C$1.2365 yesterday. One Canadian dollar buys 80.07 U.S. cents. Gains were briefly pared after the U.S. Treasury said it is willing to provide financing to the automakers until Congress reconvenes.

The U.S. dollar rose against most of the 16 major currencies tracked by Bloomberg including the Canadian dollar. The exceptions were the yen, euro, Swiss franc and Danish krone.

“News about the U.S. carmakers has raised the level of risk aversion on the markets,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “The dollar is rallying but it’s rallying against weaker currencies more.”

The Canadian currency may weaken beyond C$1.30 per U.S. dollar in the next quarter if oil makes a “a sustained break below $40 a barrel,” Gallo said.

Fennell predicts the loonie, as Canada’s dollar is known, will strengthen next year to at least C$1.11 because Canada’s economy is in better shape than that of the U.S.

Job Losses

U.S. automakers, which make more vehicles in Ontario than in Michigan, already cut employment by 40 percent between 2002 and 2007. Job losses are spreading beyond the auto factories in Ontario to parts suppliers, reducing the industry’s total employment to about 181,000 last year, down 18 percent from the high in 2002, according to the Conference Board of Canada.

Crude oil for January delivery fell as much as 9.7 percent, to $43.32 a barrel on the New York Mercantile Exchange, before paring its loss to 1.4 percent. Oil is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.

Canadian industrial capacity -- a measure of the share of plants in use -- fell to the lowest since at least 1987, when records started, Statistics Canada said today in Ottawa.

The two-year government bond’s yield fell two basis points, or 0.02 percentage point, to 1.48 percent in Toronto. The yield touched 1.466 percent on Dec. 5, the lowest since Bloomberg began compiling the data in 1989. The price of the 2.75 percent security due in December 2010 rose 3 cents to C$102.44.

To contact the reporter on this story: Chris Fournier in Montreal at [e-mail]
Last Updated: December 12, 2008 17:08 EST