The Canadian dollar weakened to a more than one-week low against its U.S. counterpart on Thursday, pressured by lower oil prices and the potential imposition of U.S. tariffs on auto imports.
At 4 p.m. EDT, the Canadian dollar was trading 0.4 per cent lower at $1.2892 to the greenback, or 77.57 U.S. cents. The currency touched its weakest since May 15 at $1.2921.
“Today’s theme is auto sector tariffs,” said Greg Anderson, global head of foreign exchange strategy in New York. “Where all of the other G10 currencies appreciated against the (U.S.) dollar today, CAD lost ground.”
The Trump administration has launched a national security investigation into car and truck imports that could lead to new U.S. tariffs, similar to those imposed on imported steel and aluminum in March.
The move to explore auto tariffs is based on flimsy logic and is part of the pressure from Washington to renegotiate the North American Free Trade Agreement, Canadian Prime Minister Justin Trudeau told Reuters in an interview.
Justin Trudeau says a move by the United States to explore tariffs on auto imports is based on flimsy logic and is part of the pressure from Washington to renegotiate the NAFTA trade pact.
Reuters
Canada is a major exporter of autos to the United States so its economy could be hurt by U.S. auto tariffs or failure to reach a deal on NAFTA.
Oil is also one of Canada’s major exports. Its price fell as expectations rose that reduced supplies from Venezuela and Iran could prompt OPEC to wind down output cuts in place since the start of 2017.
U.S. crude oil futures settled 1.6 per cent lower at $70.71 a barrel.
Still, oil has climbed by more than 20 per cent since February. Its recent strength has helped offset the gap between U.S. and Canadian interest rates, Anderson said.
The Bank of Canada will probably hold interest rates steady on May 30 as uncertain trade policy and indebted consumers necessitate caution, but firmer price and wage inflation will prompt two increases in the second half of 2018, a Reuters poll predicted.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries after U.S. President Donald Trump called off a planned summit with North Korean leader Kim Jong Un, boosting demand for safe-haven assets.
The Canadian two-year rose 6 cents to yield 1.994 per cent and the 10-year climbed 32 cents to yield 2.407 per cent.