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The Canadian dollar CADUSD weakened against its U.S. counterpart on Monday as oil prices dipped and the prospect of rising U.S. interest rates weighed on investor sentiment.

Stock markets globally extended last week’s decline as investors bet that the Federal Reserve would begin hiking interest rates as soon as March to combat inflation.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to shifts in risk appetite.

U.S. crude prices fell 0.5 per cent to $78.50 a barrel as worries about the rapid global rise in Omicron coronavirus infections offset supply disruptions in Kazakhstan and Libya.

The Canadian dollar was trading 0.3 per cent lower at 1.2684 to the greenback, or 78.84 U.S. cents, after trading in a range of 1.2611 to 1.2687.

On Friday, the loonie was boosted by stronger-than-expected domestic jobs data.

Still, data from the U.S. Commodity Futures Trading Commission shows that speculators have raised their bearish bets on the currency. As of Jan. 4, net short positions had increased to 11,025 contracts from 10,334 in the prior week.

Canadian Prime Minister Justin Trudeau is pushing ahead with a vaccine mandate for international truckers despite increasing pressure from critics who say it will exacerbate driver shortages and drive up the price of goods imported from the United States.

Canadian government bond yields were higher across much of a steeper curve, tracking the move in U.S. Treasuries. The 10-year touched its highest level since Nov. 26 at 1.753 per cent before dipping to 1.741 per cent, up 2.8 basis points on the day.

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