Canadian dollar slips on crude weakness, Fed rate signals
By Alastair Sharp
TORONTO, Nov 12 The Canadian dollar tumbled to its weakest in six weeks against the U.S. dollar on Thursday before paring some losses, as falling crude oil prices and mixed messages from the Federal Reserve on U.S. monetary policy heightened investor jitters.
The loonie, as Canada’s currency is colloquially known, gyrated sharply, with its strongest level of the session notched at C$1.3225 and its weakest at C$1.3342. A heavy slate of appearances by Fed policymakers mostly lined up behind a likely December interest rate hike, although one top official said it could be well into 2016 before an increase is justified.
“Playing this game of deciphering Fed messages is leading to frustration and uncertainty from the market, and that manifested itself today,” said Adam Button, currency analyst at ForexLive in Montreal. “Uncertainty breeds contempt.”
Button expects to see the Canadian currency at C$1.40 by mid-next year as oil production continues to outpace demand and the Fed possibly raises rates multiple times. “It’s only a matter of time until the weakness in oil clobbers the Canadian dollar,” he said.
Oil prices tumbled almost 4 percent on Thursday, accelerating a slump that threatens to test new six-and-a-half year lows.
The Canadian dollar settled at C$1.3282 to the greenback, or 75.29 U.S. cents, weaker than Tuesday’s official close and Wednesday’s 4 p.m. (2100 GMT) reading of C$1.3265 rate, or 75.39 U.S. cents.
A sharp drop in China’s October bank lending fed concern about the global growth outlook. It follows weak trade, inflation and industrial production data from China this week that has weighed on commodity markets.
Canadian government bond prices were higher across the maturity curve, with the two-year up 2.5 Canadian cents to yield 0.649 percent and the benchmark 10-year up 5 Canadian cents to yield 1.703 percent.
Bank of Canada Senior Deputy Governor Carolyn Wilkins will speak in Toronto on Friday morning, addressing the topic “Innovation, Central-Bank Style.”
Investors will also be looking forward to U.S. retail sales data on Friday.