The Canadian dollar firmed modestly against its U.S. counterpart on Tuesday, but remained near the three-week lows set a day earlier as oil prices eased and data showed slower trade growth in China and Germany.
The Canadian dollar firmed modestly against its U.S. counterpart on Tuesday, but remained near the three-week lows set a day earlier as oil prices eased and data showed slower trade growth in China and Germany. Disappointing trade data from the two countries suggested global demand may be starting to flag just as central banks contemplate reducing stimulus. Slower global demand could weigh on commodity-linked currencies, such as the Canadian dollar.
At 4:00 p.m. ET (2000 GMT), the Canadian dollar was trading at C$1.2665 to the greenback, or 78.96 U.S. cents, up 0.1 percent. The currency traded between C$1.2652 and C$1.2705 during the session. On Monday, when Canada’s stock and bond markets were closed for a public holiday, the loonie touched its weakest since July 14 at C$1.2715. “The market oversold on the USD/CAD over the past couple of weeks, so we’re probably rightsizing that a little bit for the time being,” said Don Mikolich, executive director, foreign exchange sales at CIBC World Markets.
The traditional correlation between the Canadian dollar and the price of oil, a main Canadian export, also appeared to tighten again after breaking down recently. “Now that we see … the Fed and the Bank (of Canada) move more or less in tandem on rate hikes for the next little, that takes the rate spread argument out of the picture a bit,” said Mikolich. “I think oil prices probably can play bigger roll again.” Oil prices, which cracked above $50 a barrel for the first time in several weeks, struggled to find traction above $49 a barrel as exports from some OPEC producers rose and despite news of lower crude shipments from Saudi Arabia. U.S. crude prices were down 0.53 percent to $49.13 a barrel.
Longer-term Canadian government bond prices were lower across the maturity curve, with the two-year price down 2.5 Canadian cents to yield 1.256 percent and the benchmark 10-year falling 13 Canadian cents to yield 1.937 percent. The Canada-U.S. two-year bond spread stood at -10.3 basis points, while the 10-year spread was at -33.4 basis points. Domestic housing data is awaited this week. Reports on housing starts for July and building permits for June are due on Wednesday while the June new housing price index is set for Thursday.