Loonie falls below 71 cents U.S. for first time in more than 12 years

The Canadian dollar fell below 71 cents U.S. for the first time in more than 12 years as worries over economic growth in China and geopolitical concerns roiled equity markets worldwide Wednesday.

TORONTO — The Canadian dollar fell below 71 cents U.S. for the first time in more than 12 years as worries over economic growth in China and geopolitical concerns roiled equity markets worldwide Wednesday.

In mid-afternoon trading, the oil-sensitive loonie was down 0.49 of a cent at 70.99 cents U.S. as crude prices continued to fall.

The last time Canada’s dollar was worth less than 71 cents U.S. was in August 2003 as it was recovering from a historic low of 61.79 cents U.S. set in January 2002.

The loonie has been trading progressively lower for some time, partly because of the declining value of crude oil and other commodities, as well as slow economic growth and the U.S. dollar’s rise against most major currencies.

On Tuesday, Bank of Montreal chief economist Douglas Porter told a gathering of leading economists that the loonie could fall below 70 cents U.S. before it begins to recover.

On commodity markets, the February contract for benchmark crude oil was down $1.99 at US$33.98 a barrel, while February natural gas fell seven cents to US$2.25 per mmBtu and March copper shed a penny to US$2.09 a pound.

Gold, seen as a safe haven in times of uncertainty, was up $15.10 at US$1,093.50 an ounce.

In Toronto, the S&P/TSX composite index tumbled 168.36 points to 12,751.78 in what threatened to be its sixth consecutive losing day going back to the post-Christmas holiday weekend.

In New York, the Dow Jones average was down 236.43 points at 16,922.23, while the S&P500 lost 23.19 points to 1,993.52 and the Nasdaq fell 53.94 points to 4,837.49.

In economic news, a monthly survey of China’s service industries slipped to a 17-month low, renewing fears that the second-largest economy in the world was stumbling.

Manufacturing in China has been slowing, and Beijing has been working to make the country’s economy less reliant on trade and investment and to focus instead on more self-sustaining private consumption and services. However, the latest survey raised fears that its service sector may not be strong enough to sustain China’s level of growth.

European markets were also sharply lower, with Germany’s DAX dropping 1.6 per and France’s CAC 40 and Britain’s FTSE 100 both off 1.5 per cent.

Most Asian markets were also lower amid claims by North Korea that it had carried out its first successful test of a hydrogen bomb.

But the Shanghai composite index rebounded 2.3 per cent from its most recent rout as the Chinese government said it will keep some market-stabilizing measures in place.

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