The Canadian dollar was little changed against the greenback on Tuesday, steadying after it touched the weakest level in nearly four months earlier in the session as a sell-off in oil accelerated.
The price of oil, one of Canada’s major exports, plunged to lows not seen since last November due to ongoing worries about weakening global demand, oversupply and declines across other asset classes, including equities.
U.S. crude oil futures settled 7.1 per cent lower at $55.69 a barrel.
The slide in oil prices “is delivering a very, very hard blow to the Canadian dollar,” said Karl Schamotta, director global markets strategy at Cambridge Global Payments. “The correlation between WTI (West Texas Intermediate) and the Canadian dollar has risen quite substantially.”
The one-month rolling correlation between the Canadian dollar and oil rose to 85 per cent on Tuesday, according to Refinitiv Eikon data, indicating that the currency and the commodity move mostly in the same direction. As recently as August, the correlation was negative.
At 3:35 p.m. (2035 GMT), the Canadian dollar was trading nearly unchanged at 1.3249 to the greenback, or 75.48 U.S. cents. Still, the currency touched 1.3264, its weakest intraday level since July 20.
The U.S. dollar declined against a basket of major currencies as Britain and the European Union agreed on a preliminary text for the nation to leave the economic bloc, boosting the euro and sterling.
“Optimism surrounding a Brexit deal has had virtually no impact on the Canadian dollar,” Schamotta said.
Wall Street gave up early gains as a rebound in technology stocks and renewed hope for progress in trade talks were offset by drops in Boeing and energy stocks.
Canadian government bond prices were higher across a flatter yield curve, tracking U.S. Treasuries, following the Remembrance Day holiday in Canada on Monday.
The two-year rose 6 Canadian cents to yield 2.307 per cent and the 10-year climbed 43.5 Canadian cents to yield 2.455 per cent.