The Canadian dollar was lower Monday, dragged below the 85 cent US level because of continuing weakness in the price of oil, which dropped below $50 US a barrel for the first time since 2009.

The plunging oil price hammered the Toronto Stock Exchange, which was off by more than three per cent or 380 points in the afternoon. Commodity-based shares were especially hard hit, with the energy subindex off six per cent and metals and mining off more than four.

The TSX closed down 360.95 points or 2.4 per cent at 14,392.70.

"Investors (are) trying to figure out what the new equilibrium is for oil and commodities in general," said Craig Fehr, Canadian markets strategist at Edward Jones in St. Louis. "I think we will feel our way through that for quite some time."

The loonie dropped to its lowest point since May 2009 on Monday, changing hands at 84.90 at one point, although it recovered to close at 85.05 cents US later in the day. Much of that is because of strength in the U.S. dollar — as opposed to weakness in the loonie — because the U.S. greenback has been gaining ground against virtually every other world currency for several weeks now.

The euro hit a nine-year low against the U.S. dollar on Monday, trading under 1.20 for the first time since 2005.

But much of the loonie's weakness was the same old story: an oil price that can't seem to find a bottom.

Oil keeps sliding lower

The price for a barrel of the benchmark North American oil known as WTI lost $2.65 to close at $50.04 on Monday, but traded below the $50 threshold earlier in the day.

That's the first time oil has been that low since the summer of 2009, when the world economy was just starting to come out of a devastating recession.

Dirk Lever, managing director of Institutional Equity Research at Altacorp, says Monday's oil weakness wasn't tied to any new data, but rather a reflection of people coming back to work from the Christmas holiday and catching up on their trading. "This is the first day we've had a real reflection in the market with everybody back at work," Lever said, adding he expects oil to find a floor price soon.

"I don't think we'll get back to $100 for a while," he said, "but it's not sustainable at below 50 for long."​