The Canadian dollar weakened against its U.S. counterpart on Wednesday as oil prices tumbled and stop-loss orders were triggered in the market between it and the Australian dollar, with the loonie pulling back from an earlier six-week high.
The Canadian dollar had rallied as much as 3.2 per cent against the Australian dollar since the beginning of the month
The move generated a lot of investor interest in selling the AUD-CAD currency pair, before a “wicked reversal” which caused some to abandon the trade, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
“I think that some of the stop-loss action in that cross may be part of the weakness in CAD relative to the U.S. dollar,” Anderson said.
Stop-loss orders are used by investors to limit their risk in a trade.
The Canadian dollar was trading 0.1 per cent lower at 1.3134 to the greenback, or 76.14 U.S. cents. It was the only G10 currency to lose ground against the greenback as hopes rose for a large U.S. coronavirus relief package and the price of oil, one of Canada’s major exports, fell.
U.S. crude oil futures settled 4 per cent lower at $40.03 a barrel after U.S. inventory figures showed demand weakening for refined products as global COVID-19 cases spiked.
Earlier in the session, the loonie touched its strongest level since Sept. 7 at 1.3081.
Canada’s annual inflation rate accelerated to 0.5 per cent in September but softer-than-expected retail sales growth of 0.4 per cent month-over-month for August and a sluggish estimate for September suggest a dampening heading into the holidays, Statistics Canada data showed.
Canadian government bond yields were higher across the curve in sympathy with U.S. Treasuries. The 10-year rose nearly 1 basis point to 0.614 per cent, having touched its highest since Sept. 1 at 0.653 per cent.
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