Canadian dollar dips Friday but posts biggest weekly gain in three months

The Canadian dollar weakened against its U.S. counterpart on Friday as the greenback rose broadly, but the loonie still had its best weekly performance in nearly three months.

The Canadian dollar was trading 0.3 per cent lower at $1.3037 to the greenback, or 76.71 U.S. cents.

The currency, which on Thursday touched its strongest in two weeks at $1.2976, traded in a range of $1.2984 to $1.3053.

“Generally firmer” U.S. data and a lack of domestic impetus weighed on the loonie, said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.

The U.S. dollar rose against a basket of currencies, rebounding from a near 1.5-month low, as upbeat U.S. economic data and higher Treasury yields rekindled some investor appetite for the greenback.

The decline for the loonie came as U.S. President Donald Trump instructed aides to proceed with tariffs on about US$200-billion of Chinese products.

Canada exports many commodities and runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

Still, the loonie has been boosted this week by higher oil prices and optimism that a deal to renew the North American Free Trade Agreement will be reached. It has climbed 1 per cent since the start of the week, the most since late June.

U.S. House of Representatives Democratic Leader Nancy Pelosi warned the Trump administration that NAFTA should be maintained as a trilateral pact between the United States, Mexico and Canada and not just as a U.S.-Mexico arrangement.

The price of oil, one of Canada’s major exports, was supported by worries of more sanctions on Iran. U.S. crude oil futures settled 0.6 per cent higher at US$68.99 a barrel.

Speculators have raised bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Sept. 11, net short positions had increased to 26,942 contracts from 26,307 a week earlier.

The ratio of Canadian household debt to income widened to 169.1 per cent in the second quarter from an upwardly revised 168.3 percent in the first quarter, Statistics Canada said. However, that was still lower than in the comparable period last year.

Canadian government bond prices fell across much of a steeper yield curve in sympathy with U.S. Treasuries. The 10-year fell 13 Canadian cents to yield 2.343 per cent.

The 10-year yield touched its highest intraday since Aug. 8 at 2.365 per cent.