01/29/2015 12:42 EST | Updated 03/31/2015 05:59 EDT

Canadian dollar continues slide to 78 cents

The Canadian dollar continued its downward trajectory Thursday, falling to 78 cents a day after closing below 80 cents for the first time since 2009.

The loonie was at 78.94 cents US at midday, down from its close of 79.87 cents US on Wednesday.

Declining oil prices continued to put pressure on the Canadian dollar, with West Texas Intermediate crude dipping close to $40 before recovering to the $43.88 range. Brent oil contracts were at $48.58 US a barrel.

But the real trigger was the Fed's open market committee announcement Wednesday, which seemed to indicate the U.S. central bank was on track to raise interest rates in the spring, in line with its previous schedule.

The Bank of Canada has had one rate cut and many analysts are predicting another, which makes the Canadian dollar even less attractive by comparison with the U.S. dollar.

"As oil prices move lower, this only exacerbates the impact on the Canadian dollar due to the Bank of Canada's increased likelihood to cut rates with falling oil," said Rahim Madhavi,  an analyst at Knightsbridge Foreign Exchange in Toronto.

Stocks down sharply

Toronto stocks also fell sharply on sliding oil prices. The TSX/S&P index was down 113 points to 14489 at midday after dropping more than 200 points in morning trading.

In a note to investors, BMO chief economist Doug Porter pointed out that the dollar has fallen 19.5 per cent in the past two years as it stood just below parity with the greenback in January 2013.

"That is the largest two-year decline in the Canadian dollar ever, which last I checked is a long period of time. It's even larger than the deep drop in the late '70s when Canadian inflation was running especially hot, and there were very real fiscal concerns, as well as an impending referendum in Quebec," he said.

Porter points out that other currencies are also falling against the strengthening U.S. dollar.

Many analysts have predicted the Canadian dollar will fall as low as 75 cents by the end of this year.

- To view this chart on mobile: Cdn. $ vs US $