The Canadian dollar is diverging from other commodity currencies as the decade-long boom in raw materials that has fuelled growth is bogged down by falling energy prices and resistance to oil pipeline-expansion plans.
The loonie, as the currency is known for the image of the aquatic bird on the C$1 coin, is down 1.1 per cent in the fourth quarter versus nine developed-nation peers tracked by Bloomberg, while the currencies of Australia, New Zealand and Norway are all higher. Against its United States counterpart, the loonie has dropped 0.2 per cent since September.
Provinces with commodity-driven economies, including British Columbia and Alberta, are feeling the effect of weakness in a range of resource exports from oil to natural gas and potash.
Stephen Harper, the prime minister, said this month that Canada, which has the world's third-largest pool of crude-oil reserves, will not approve foreign state-owned firms taking controlling interests in oil-sands projects barring exceptional circumstances, limiting the scope for future investment.
"It's a bit perplexing why the Canadian dollar has not kept up with these other commodity currencies," said David Tulk, the chief macro strategist at Toronto Dominion Bank's TD Securities unit. "People are coming to terms with the fact that some of Canada's commodity potential is still bottled up, just looking at some of the infrastructure issues with the pipeline system."
The Canadian dollar had gained 42 per cent against its US counterpart from 2000 to 2011, when oil rose to 18 per cent of exports from 5 per cent, according to Statistics Canada. The country's GDP grew 163 per cent in the same period.
In early trading in London yesterday, the loonie was little changed at 98.60 cents per US dollar. One Canadian dollar buys $1.0142.
* Bloomberg News