The Canadian dollar edged lower against its U.S. counterpart on Monday as oil prices declined and the spread between Canada’s two- and five-year yields turned negative for the first time since September 2007.
The five-year yield fell 0.6 basis points below the two-year yield. A flat or inverted yield curve could reduce the incentive for banks to lend and hinder investment in the multiyear projects that tend to boost the speed at which an economy can grow.
The price of oil, one of Canada’s major exports, fell in line with further declines in global stock markets, erasing the gains made last week when major producers agreed to cut their crude output from January.
U.S. crude prices were down 2.3 per cent at $51.4 a barrel.
At 9:36 a.m., the Canadian dollar was trading 0.1 per cent lower at 1.3342 to the greenback, or 74.95 U.S. cents. The currency, which touched on Thursday its weakest in nearly 18 months at 1.3445, traded in a range of 1.3294 to 1.3362.
The modest decline for the loonie came as the U.S. dollar rose against a basket of major currencies and as the British pound lost ground after British Prime Minister Theresa May abruptly decided to pull a parliamentary vote on her Brexit deal.
The loonie was paring some of its gains following stellar jobs data on Friday. Canada added a record number of jobs in November and the unemployment rate dipped to a new all-time low, a performance that analysts said should help ease the Bank of Canada’s worries about a recent economic slowdown.
On Monday, the Canadian Mortgage and Housing Corporation (CMHC) said that the seasonally adjusted annualized rate of Canadian housing starts increased to 215,941 units from a revised 206,753 units in October. Economists had expected starts to fall to 198,000.
In separate data, the value of Canadian building permits edged down by 0.2 per cent in October from September, Statistics Canada said.
Canadian government bond prices were mixed across a flatter yield curve, with the two-year price down 1.5 cents to yield 2.01 per cent and the 10-year rising 10 cents to yield 2.063 per cent.