NEWS

Canadian dollar falls nearly 2 cents as oil plunges

05/19/2015 03:11 EDT | Updated 05/19/2016 05:59 EDT
The Canadian dollar has fallen by nearly two cents since Friday, as the U.S. greenback shot upward and oil headed down.

The loonie closed at 83.26 cents US on Friday but slid all day yesterday as markets in Canada were closed.

By Tuesday, the dollar had fallen by 1¾ cents to 81.75 cents US.

Part of the problem is the good news out of the U.S. Both the Dow and S&P stock indexes reached record levels on Monday and continued climbing Tuesday.

And new data showed that the U.S. new homes sector has finally thrown off its torpor, hitting its highest level in 7½ years in April, at 1.135 million starts.

The news boosted the U.S. dollar, which also rose against the euro as the European Central Bank said it would step up its pace of buying bonds.

Poloz's gloomy outlook

Traders are also anticipating the release of minutes of the U.S. Federal Reserve meeting in April, which come out Wednesday. Those minutes could provide some insight into when the U.S. central bank will raise rates.

At the same time, Bank of Canada governor Stephen Poloz cast a shadow on the Canadian dollar, saying the pain of low oil prices has yet to be fully felt and there is further uncertainty ahead for Canada's economy.

That outlook is slightly grimmer than Poloz was putting forward in mid-April and helped to create doubts about the loonie's trajectory.

Meanwhile, Goldman Sachs predicted more bad news for oil, saying it will sink to $45 US a barrel by October as recent gains in crude prices have encouraged more production.

West Texas Intermediate crude fell $2.15 US on Tuesday to $57.28 US a barrel, while Brent was down $2 at $64.24 US.

MORE:cbcNews