TORONTO - The Canadian dollar hit fresh multi-year lows below the 80-cent US level Thursday against an American currency that strengthened on growing conviction the U.S. Federal Reserve will move to hike rates sooner rather than later.
The loonie shed 0.57 of a cent to 79.3 cents US, its lowest level since late March 2009.
The slide added to a three-quarters of a cent plunge on Wednesday after the Fed said at the end of its scheduled policy meeting that it would be patient in beginning to hike rates from near zero, where they have been since the 2008 financial collapse. But at the same time, it pointed out a string of positives about the American economy, including that economic activity is expanding at a solid pace.
"The Fed leaves all doors open to hiking interest rates as early as June," said Camilla Sutton, chief FX strategist, managing director, Scotiabank Global Banking and Markets.
"However the core theme is that the Fed is data dependent."
The loonie was also battered by sliding commodity prices.
Oil prices inched up slightly after plunging almost $2 Wednesday in the wake of figures showing U.S. crude inventories still at 80-year highs. The March contract added eight cents to US$44.53 a barrel.
Elsewhere on commodity markets, March copper fell three cents to US$2.45 a pound while April gold declined $31.30 to US$1,255.90 an ounce.
While the loonie has been hit by the prospect of higher U.S. rates, it has also suffered amid a lower interest rate environment in Canada. The Bank of Canada surprised markets last week with a quarter-point cut to its key rate to 0.75 per cent in a pre-emptive move aimed at sparing the economy somewhat from the effects of oil prices that have collapsed. And many analysts say the bank could very well move to cut again in the near future.
Traders looked to the release Friday of the latest economic growth data. Statistics Canada is expected to report that gross domestic product rose by 0.1 per cent in November.
Fourth-quarter U.S. GDP data will also be released on Friday.