The Canadian dollar weakened against its U.S. counterpart on Friday as the fast-spreading Omicron coronavirus variant and the more hawkish stance of major central banks weighed on investor sentiment.
The loonie was trading 0.5 per cent lower at 1.2829 to the greenback, or 77.95 U.S. cents, after trading in a range of 1.2772 to 1.2839. For the week, the currency was on track to decline 0.8 per cent.
“Weaker risk appetite is spilling over into energy as a further headwind for the CAD,” strategists at Scotiabank, including Shaun Osborne, said in a note.
Stocks globally and the price of oil, one of Canada’s major exports fell as rising Omicron cases spark worries about the hit to the global economy. U.S. crude prices were down 1.7 per cent at $71.12.
Investors were also assessing a signal this week by the Federal Reserve that it could hike interest rates three times next year. The Bank of Canada has also turned more hawkish.
With inflation surging, the BoC is likely to change its interest rate guidance in the new year so that it has the option to raise borrowing costs earlier than planned despite the threat the new variant poses to growth, analysts said.
Foreign investors bought a net C$23.9-billion in Canadian securities in October, led by private corporate bonds and federal government bonds, Statistics Canada said.
Canadian investors bought a net C$5.4-billion worth of foreign securities, led by acquisitions of non-U.S. foreign bonds.
Canadian government bond yields were mixed across a flatter curve. The 10-year rate touched its lowest level since Sept. 23 at 1.303 per cent before recovering to 1.325 per cent, down less than 1 basis point on the day.
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