The Canadian dollar plumbed new lows against its U.S. counterpart Thursday, with little sign of support in foreign exchange markets.
At the close of official Bank of Canada trading at 4 p.m. ET, the dollar was quoted at 62.66 cents US a new all-time low down 0.28 cents from its official close Wednesday of 62.94 cents.
Bank of Canada officials described trading as "moderate".
Analysts are blaming several factors for the loonie's recent decline, including the international perception that the Canadian currency is more vulnerable to weak commodity prices because our export economy is more dependent on commodity earnings.
There's also the old "flight to quality" argument that when times are tough, the U.S. dollar is the world's currency of choice.
In April this year, when the loonie was flirting with its all-time low, finance minister Paul Martin said the weakness in the Canadian dollar was really a question of perspective.
It wasn't that the Canadian dollar was weak, in Martin's view. It was that the U.S. greenback was so strong.
"Virtually every economist will tell you that what we're dealing with is not the weakness of the other currencies, but the strength of the U.S. currency and that is what is taking place," Martin said at the time.
"And the fact is that while the Canadian currency obviously is reflecting that strength, nonetheless the Canadian dollar has risen against virtually every other currency," he said.
But that was April. A current look at the loonie versus a basket of major international currencies shows that the Canadian dollar has depreciated against most of them in the last 90 days.
In the last three months, the Canadian dollar has depreciated 2.9 per cent against the U.S. dollar, 4.4 per cent against the British pound, 1.6 per cent against the Mexican peso, 4.8 per cent against the euro, 7.2 per cent against the Swiss franc, and 3.8 per cent against the Japanese yen.
In the last 30 days, though, the loonie has managed slight gains against several currencies including the yen, the British pound, the euro, and the Swiss franc. But over a one-year period, only the yen has fallen against the loonie. The other major currencies have all done better than the Canadian buck.
Anyone expecting the Bank of Canada to rush in and support the loonie may spend a long time waiting.
Bank of Canada governor David Dodge is on record as saying the central bank isn't fond of intervening in currency markets to tweak the dollar on a day-to-day basis. In fact, it hasn't done that since 1998 during the Russian financial crisis.
"The only time we would go in is if there were a major international crisis where we would have to go in along with other countries," Dodge told reporters back in April.
What the Bank of Canada is likely to do is to cut interest rates further an expectation that is putting additional downward pressure on the dollar. Most analysts are looking for another 3/4 of a percentage point cut by January 2002. That would take the key overnight lending rate to just 2 per cent.