BUSINESS

Canadian dollar adds to losses as ECB embarks on massive stimulus program

01/22/2015 09:25 EST | Updated 03/24/2015 05:59 EDT
TORONTO - The Canadian dollar closed below 81 cents US Thursday while the American currency spiked in the wake of an announcement by the European Central Bank that it's embarking on a major stimulus program.

The loonie fell 0.45 of a cent to 80.62 cents US after ECB president Mario Draghi said the bank is launching a massive program of quantitative easing, which will involve spending 60 billion euros a month to buy investment grade sovereign bonds.

There had been high hopes that Draghi would announce such a measure, which is aimed at getting eurozone inflation up to the ECB target of two per cent. The asset purchase program will start in March and continue through to September 2016.

But Draghi indicated that the program is basically open-ended until inflation is back on track.

Meanwhile, oil prices fell sharply amid Department of Energy data showing a much greater than expected rise in U.S. inventories last week. The March contract in New York fell $1.47 to US$46.31 a barrel as supplies jumped 10.07 million barrels versus the 2.7-million-barrel increase that had been expected.

Metal prices were mixed. with March copper three cents lower at US$2.58 a pound. Gold prices improved after the ECB announcement. with February bullion up $7 to US$1,300.70 an ounce.

This has been a very tough week for the Canadian currency, which is down over six U.S. cents so far this month.

It fell 2.5 cents U.S. in just the first three days of this week, which included the Bank of Canada's surprise announcement Wednesday of a quarter-point cut in interest rates.

The currency has also been weakened by the collapse in oil prices, which have fallen 50 per cent since last summer amid a glut of supply. Prices have plunged 40 per cent just since the end of November after OPEC made it clear a production cut was not in the cards.