The Canadian dollar CADUSD weakened against its U.S. counterpart on Monday as equity markets fell, but the currency’s decline was less than for some other major currencies as investors awaited a Bank of Canada interest rate decision this week.
The loonie was trading 0.2% lower at 1.2980 to the greenback, or 77.04 U.S. cents, the smallest decline among G10 currencies. It traded in a range of 1.2943 to 1.3051.
“In the face of broad-based U.S. dollar strength, the weakness in stocks, the Canadian dollar has done fairly well,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
“The fact that the Bank of Canada meets later this week and is widely expected to hike 75 basis points might be deflecting some of the selling pressure on it.”
Shares globally declined and the safe-haven U.S. dollar advanced against a basket of major currencies as investors braced for a U.S. inflation report on Wednesday that could force another super-sized interest rate hike from the Federal Reserve.
Policymakers worldwide are battling inflation even as the threat of a recession grows.
The BoC is expected to raise its benchmark rate by three-quarters of a percentage point on Wednesday, which would be its biggest hike in 24 years.
Some strategists say the central bank could move even more aggressively, with RBC Capital Markets assigning a 25% probability of a 100 basis points hike.
The price of oil, one of Canada’s major exports, fell as markets braced for an expected drop in demand because of mass testing for COVID-19 in China. U.S. crude prices settled 0.7% lower at $104.09 a barrel.
Canadian bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year eased 3.4 basis points to 3.262%, after touching its highest intraday level since June 30 at 3.319%.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.