Canadian dollar hits 7-week low as commodity-linked currencies retreat

The Canadian dollar slumped to a seven-week low against its broadly stronger U.S. counterpart on Wednesday, as lower oil prices and worries about prospects for global growth weighed on commodity-linked currencies.

At 4:17 p.m., the Canadian dollar was trading 0.4 per cent lower at 1.3159 to the greenback, or 75.99 U.S. cents. The currency touched its weakest level since Sept. 11 at 1.3170.

For the month, the loonie declined 1.9 per cent, its worst performance since February.

The price of oil, one of Canada’s major exports, fell and posted the worst monthly performance since mid-2016, pressured by evidence of rising global crude supply and recent U.S.-China trade tensions.

U.S. crude oil futures settled 1.3 per cent lower at $65.31 a barrel.

Anxiety about China’s cooling growth and its impact on the global economy did not let up on Wednesday after data showed China’s manufacturing sector in October expanded at its weakest pace in over two years.

“Any time global growth is under pressure, it is usually the commodity currencies that will come under fire first,” said Bipan Rai, North America Head, FX strategy at CIBC Capital Markets.

The commodity-linked Australian and New Zealand dollars, together with the loonie, were the worst performing G10 currencies on Wednesday.

The U.S. dollar climbed to its highest level in 16 months against a basket of currencies as private sector payrolls data showed continued U.S. economic strength.

The Canadian economy grew by 0.1 per cent in August from July on gains in the oil and gas extraction sector, as well as finance and insurance, Statistics Canada said. Analysts had forecast no change.

Bank of Canada Governor Stephen Poloz repeated his message that Canadian interest rates would need to keep rising to meet the central bank’s inflation target.

Canada’s productivity and credit growth face a threat from a flattening yield curve as it makes it less appealing to invest in long-term projects, and lesser still if the Bank of Canada meets its goal of a 3 per cent interest rate.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as stocks on Wall Street rallied. The two-year fell 4.5 cents to yield 2.338 per cent and the 10-year declined 33 cents to yield 2.494 per cent.

The 2-year yield touched its highest intraday since Oct. 4 at 2.343 per cent.

Canada’s jobs report for September and August trade data are due on Friday.

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