The Canadian dollar fell to its lowest levels since 2003 on Wednesday amid yet another oil market rout that left Canadian oil prices near their lowest levels ever.
The North American benchmark oil price fell more than 16 per cent, to just above US$22 per barrel, but Canadian crude, which typically sells at a discount, was trading at barely above US$9 a barrel. That matches the lowest price ever recorded for Western Canadian Select oil.
The loonie, which tends to move with oil prices, fell as low 68.3 cents U.S. in Wednesday morning trading, and closed the day at 69 cents. With the exception of a few days in 2016, it hasn’t traded this low since the spring of 2003.
Canadian oil had been trading at around US$35 per barrel last month, before the COVID-19 outbreak severely reduced demand for fuel, causing oil prices to fall into a tailspin.
The Toronto Stock Exchange Composite Index closed down 7.6 per cent at 11,721.42, having hit its lowest intraday level since July 2012. The index has fallen about 35 per cent from its Feb. 28 peak.
“Today feels like the capitulation everyone was waiting for,” said Greg Taylor, portfolio manager at Purpose Investments. “The headlines will get worse but markets are now pricing in a major global recession.”
Wall Street resumed a steep slide while bond markets rushed to price in the sheer scale of government support programs and handouts announced over the past 24 hours, all aimed at softening the economic shock of the virus.
The market dive came as Prime Minister Justin Trudeau announced an $82-billion stimulus package on Wednesday, including $27 billion in direct aid to households and businesses, and $55 billion in deferred taxes.
“We expect the Bank of Canada to further reduce the target interest rate, taking it down in the coming days or weeks to 0.25 per cent, the low of the last recession,” said Royce Mendes, senior economist at CIBC Capital Markets.
The United States and Canada agreed to close the border between the two countries to non-essential travel.
With a file from Reuters