The Canadian dollar weakened against its U.S. counterpart on Wednesday, pulling back from a six-week high the day before, as oil prices fell and the greenback broadly climbed.
At 3:43 p.m., the Canadian dollar was trading 0.3 per cent lower at 1.3194 to the greenback, or 75.79 U.S. cents. The currency traded in a range of 1.3140 to 1.3215.
Lower oil prices were “the main driver” of the Canadian dollar, said Simon Côté, managing director, risk management solutions, at National Bank Financial.
There was no discernable impact from Wednesday’s kickoff of a six-week Canadian federal election campaign in which Prime Minister Justin Trudeau’s Liberals face a tight race.
The price of oil, one of Canada’s major exports, was put under pressure by a report that U.S. President Donald Trump weighed easing sanctions on Iran, which could boost global crude supply at a time of lingering worries about global energy demand.
U.S. crude oil futures settled 2.9 per cent lower at $55.75 a barrel, while the U.S. dollar climbed against a basket of major currencies, including the euro, a day before the European Central Bank is expected to add further stimulus in a bid to boost the region’s economy.
Data from Statistics Canada showed that Canadian industrial capacity usage rose more than expected to 83.3 per cent in the second quarter, adding to the batch of upbeat economic reports that has helped boost the loonie by 0.9 per cent since the start of the month.
On Tuesday, the loonie posted its strongest intraday level since July 31 at 1.3134.
“It feels here as if my (U.S.) dollar sellers, mostly corporate, are sitting on long-dollar positions,” Côté said. “If that movement on U.S.-CAD resumes to the downside, at some point somebody will have to sell more dollars ... that’s where I think the risk is of a bigger move.”
The loonie’s gains this month have coincided with a rally in global stocks . In addition, the Bank of Canada last week held its benchmark interest rate unchanged at 1.75 per cent and made no mention of future rate cuts despite easing this year by many of its global peers, including the U.S. Federal Reserve.
Canadian government bond prices edged higher across much of the yield curve, with the two-year up 2.5 cents to yield 1.584 per cent and the benchmark 10-year rising 10 cents to yield 1.418 per cent.
Still, the 10-year yield touched its highest intraday level since Aug. 1 at 1.442 per cent.
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