Stock markets tumble as loonie falls to new 13-year low

The Canadian dollar again fell against the U.S. dollar on Wednesday, closing below the 70-cent US level for the first time since April 30, 2003. North American stock markets also ended the day markedly lower,with triple-digit losses in both Toronto and New York.

The loonieclosedat 69.71cents US, down 0.43cents from Tuesday's close. Earlier in the day, it traded as low as 69.54 cents US.

• Canadian dollar will drop to 59 cents US in 2016, Macquarie forecasts

"We're paying close attention to the state of the Canadian dollar," federal Finance Minister Bill Morneau said Wednesday afternoon in Toronto, the latest stopon hispre-budget consultation tour.

"Canadians pay close attention and they want to know that we are watching to make sure that we understand how that impacts our economy," he said.

But, in the end, the value of the dollar "is not something that's in our control," Morneausaid.

Stock markets sold offin a major way. The S&P/TSX composite index closed203pointslower, or 1.6per cent, at 12,170, led by losses in the energy,financial and industrial sectors.

The Dow Jones industrial average tumbled365points, or 2.2per cent, to end the trading day at16,152, while thebroader S&P 500 index fell 48points, or 2.5per cent, to1,890. That bringsthe drop in the benchmarkS&P index to 10 per cent from its November peak making it an official market correction.

Crude oil futures rosefour cents to settleat $30.48US a barrel in New Yorktrading thefirst daily gain after eight straight losing sessions. The futures contracthad been up more than $1 earlier in the trading session.

That early gain all but evaporated whenthe U.S. Energy Information Administration released its weekly inventory report that showed a build in crude supplies and a big surge in diesel and gasoline stockpiles. Crude oil futures had briefly slipped below $30 US a barrel in New York trading on Tuesday.

Bank of Canada in spotlight

Colin Cieszynski, chief market strategist at CMC Markets, says the tumble in oil prices is the main culprit behind thesteady fall in the loonie.

He said there's been speculation that Bank of Canada governor Stephen Poloz may "kick off 2016 with a rate cut the same way he did in 2015."

Several analysts, like Capital Economics' David Madani,believe the Bank of Canada will drop its key lending rate by another quarter of a percentage point on Jan. 20 its next scheduled rateannouncement.

"The incoming data suggest that the economy contracted in the final quarter of last year, and was therefore much weaker than the Bank's forecast of a 1.5 per centannualized gain," Madaniwrote in a morning commentary, adding that he thinks the big drop in oil prices in the past month "has completely undermined prospects for economic growth this year."