The Canadian dollar CADUSD weakened against its U.S. counterpart on Thursday as the price of oil pulled back from its highest level in 14 years and the safe-haven greenback broadly climbed.
The loonie was trading 0.4% lower at 1.2685 to the greenback, or 78.83 U.S. cents. Earlier in the day, it touched its strongest intraday level since Jan. 26 at 1.2588.
“We had quite a significant fall in crude oil prices early on. That seemed to be a catalyst for some profit-taking after the overnight move,” said Shaun Osborne, chief currency strategist at Scotiabank.
The price of oil, one of Canada’s major exports, touched its loftiest since September 2008 at $116.57 a barrel on disruption to Russian oil exports but then turned lower. U.S. crude prices settled down 2.7% at $107.67 a barrel.
“There does seem to be a short-term mean reversion issue for dollar-Canada,” Osborne said. “Despite all the volatility that we have seen in spot (FX) over the last five or six weeks, we have tended to close out the week around about the 1.2720 area.”
The U.S. dollar rose against a basket of major currencies as the euro extended recent declines.
Meanwhile, Bank of Canada Governor Tiff Macklem said that the central bank has “considerable space” left to raise interest rates this year and did not rule out a rare 50-basis-point move.
On quantitative tightening, Macklem said that when the process begins the bank would stop purchasing bonds.
Stopping purchases would result in net supply rising by about C$8 billion per quarter, strategists at TD Securities, including Andrew Kelvin estimated. The increase would be C$12 billion if purchases were discontinued in the primary as well as the secondary market, the strategists said.
Canadian bond yields were mixed across a flatter curve. The 10-year eased 3.9 basis points to 1.780%.
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