Canadian dollar near 11-year low

Canadian dollar coins are displayed on a map of North America, January 9, 2014 in Montreal. (Paul Chiasson / THE CANADIAN PRESS)

TORONTO -- The Canadian dollar ended Tuesday at its lowest point since August 2004, closing more than half a cent from the previous session.

The loonie closed at 75.87 cents US, down .58 cent of a U.S. cent from Friday's close. Canadian markets were closed on Monday.

The S&P/TSX composite index ended the day at 14,491.05, up 22.61 from Friday's close.

Ian Nakamoto, director of research at 3Macs, said a lack of confidence in global growth has been weighing on stock markets around the world and dragging down the Canadian dollar.

In New York, the Dow Jones industrial average closed down 47.51 points at 17,550.69, the Nasdaq index fell 9.84 points to 5,105.55 and the S&P 500 slipped 4.72 points to 2,093.32.

Here in Canada, Nakamoto said, the pessimistic global forecast means investors foresee less demand for the raw materials and energy that Canada produces.

"We're in an environment where there is excess supply in those things, very low demand, and that translates into weak commodity prices and weak stocks that produce those commodities," Nakamoto said.

With less demand for Canadian energy and mining and a recovering American economy, he said, the Canadian dollar becomes less valuable against the greenback.

On the commodity markets, the December gold contract ended at US$1,090.70 an ounce, up $1.30 from Monday, while the September crude contract closed at US$45.74 a barrel, up 57 cents.

The September contract for natural gas closed up 6.4 cents to US$2.812.

Nakamoto said recent news reports focusing on volatility in the Chinese stock market and the Greek debt crisis ignore a more widespread sluggishness in the global market.

"If the U.S. and Europe were very strong and China was doing the same thing, I don't think it would be nearly as bad for the commodities," he said.

Nakamoto said that some see the value of the Canadian dollar as a source of national pride, and that average Canadians will feel the bite when it comes to imported goods and vacations down south.

But he said the news is positive for some sectors, especially those hit by the recent slide in commodity prices.

Canadian companies in the resource and export sectors are well-positioned to take advantage when growth picks up, Nakamoto said, because they take in revenue in American dollars and pay their costs in the cheaper Canadian currency.

"It acts as a buffer," he said. "In Canada the revenue is falling, but it's not falling as quickly. A lot of the damage in the material sector is going to be for U.S. companies with costs in U.S. dollars."