Canadian dollar, TSX drop as oil trades below US$39 a barrel

US crude futures fell to as low as $37.50 per barrel, also hitting a near-seven-year low, hitting energy shares in Wall Street and pulling Asian commodity stocks lower.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent, erasing all the gains made so far this month, with resource-heavy Australian shares .AXJO leading decline with a fall of 0.9 percent.

The oil-sensitive loonie dropped almost 0.8 of a cent from Friday’s close to end the day at an even 74 cents U.S. That’s the lowest the Canadian dollar has been against the greenback since June 2004.

The USD has rallied against CAD and has broken through the 1.35 price level but still seems to be holding in the short term.

Currencies of major oil exporting nations such as the Canadian dollar, the Norwegian crown and Russian rouble fell.

At midafternoon, Toronto’s S&P/TSX composite index was down 127.51 points at 12,915.32 as the price of oil traded in a narrow range near seven-year lows after a big drop Monday that helped send the TSX down more than 300 points. That’s because crude and wholesale gasoline are both priced in USA dollars. The fall extends this year’s slide to more than 14 per cent.

The corresponding decline in the Canadian dollar makes exports cheaper and was supposed to be good news for Ontario’s manufacturing sector, but it has yet to see a meaningful rebound after years of overvaluation.

Underlining the cautious outlook for China, a Reuters poll of Japanese firms showed deep pessimism about near-term Chinese growth prospects, with 79 percent saying they do not expect to expand business there next year.

Ahead of the opening bell, futures for the Dow Jones collapsed 170 points, or 1%, to 17,586, futures for the S&P 500 dropped 21 points, or 1%, to 2,060, and futures for the NASDAQ subsided 49.25 points, or 1.1%, to 4,651.75.

In late trading, USA benchmark 10-year Treasury notes were up 13/32 to yield 2.227 percent, down from Friday’s 2.273 percent. Refiners have been slow to pass along all of the savings from falling prices for crude oil, instead pocketing higher profits, he noted.

Rival Canadian National Co fell 1.5% to $72.87.

Currency analyst Colin Cieszynski says crude prices and Canada’s dollar are being dragged down by last week’s meeting of the OPEC cartel, which signalled members won’t likely reduce output below 31.5 million barrels per day for at least six months.

The February gold contract fell $8.90 to settle at US$1,075.20 per ounce, while the January contract for natural gas fell 8.9 cents to US$2.067 per mmBtu.