The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.
The free fall of the Canadian dollar, which has only accelerated in 2014, undoubtedly has the CFOs of Canada’s mining companies breaking out the spreadsheets and tallying up the pluses and minuses of the new, low-loonie environment. Goodbye simple calculations that assumed parity between the Canadian and U.S. dollars, as the loonie has slid over 9% in the past year.
At press time, the Canadian dollar was trading at US90¢, and on Jan. 27, the Canadian dollar slipped below that level for the first time since July 2009, as the U.S. dollar surged and currencies of emerging-market and resource-exporting countries contracted sharply.
These currency devaluations triggered round after round of selling in emerging countries’ stock and bond markets, and a simultaneous flight to safety in U.S. dollars, stocks and bonds.
Turkey grabbed the biggest headlines worldwide, as the lira hit a record low against the U.S. dollar, prompting the Turkish central bank to convene an emergency meeting and vow to defend the lira with steep interest-rate hikes.
Back in Canada, many currency analysts are predicting the loonie could tumble into the mid-US80¢ range in the near- to mid-term, causing people to remember those days around the turn of the millennium when the Canadian dollar limped along around the US65¢ level.
A slew of factors have been jostling the world’s currencies of late, adding a new layer of volatility to a global economy still on the mend from the 2008 flash crash.
Key factors in the loonie–greenback dynamic have included: mixed economic data out of the U.S.; the U.S. Federal Reserve’s decision in late January to taper its bond purchases by another US$10 billion a month, to US$65 billion a month; expectations of lower growth rates of the Chinese economy; new concern over the health of Chinese banks; weak prices for many commodities, including oil and gas; and unspectacular earnings reports from Canadian companies.
Contrary to many analysts’ expectations, gold has fared well despite this recent surge in the U.S. dollar, trading at US$1,267 per oz. at press time and enjoying a London AM fix as high as US$1,270 per oz. on Jan. 27. This compares with the Dec. 31, 2013, close of US$1,201.50 — in other words, the gold price has risen 5.7% so far this year in U.S. dollars.
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