TORONTO: The Canadian dollar was little changed against the US currency on Tuesday, even as market players eyed a sharp fall in commodity prices driven by concerns about China's growth outlook.
Canada's currency is sensitive to volatility in resource-related industries given the country's heavy reliance on mining and oil and natural gas for much of its export revenue.
"It's symptomatic of the broader market malaise," said Adam Button, currency analyst at ForexLive in Montreal. "Some worries about China are creeping in, but the Canadian dollar is already so badly beaten down that there is no enthusiasm to keep selling it."
The loonie, as Canada's currency is colloquially known, has weakened sharply this year, with the Bank of Canada's worries about the low inflation rate eliminating any prospect of a near-term rate hike.
Copper tumbled on Tuesday to its lowest levels in over three years on worries about Chinese demand and liquidation of inventories used for finance deals.
World stocks held steady, the euro edged down, oil fell and gold nudged higher. That pattern was set in Asia, where markets took a break from recent volatile trading, but struggled to do much more than make incremental moves.
"There is a bit of a data void in the short term," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London. "Clearly the events in Russia and Ukraine are still significant, so there is always the risk we could see another bounce of risk aversion."
Tensions over Ukraine continued to build on Tuesday. With diplomacy at a standstill, Ukraine's acting president announced the formation of a volunteer national guard, while ousted leader Viktor Yanukovich insisted he remained the country's legitimate leader.
The Canadian dollar ended the session changing hands at C$1.1103 to the US dollar, or 90.07 US cents, little changed from Monday's close of C$1.1101, or 90.08 US cents.
"We're seeing a little bit of a grind back to the downside, and I wouldn't be surprised if the flow continues to be biased towards dollar-CAD grinding lower and perhaps towards the C$1.1070-C$1.1075 area," said Stretch, noting that the Canadian dollar has lagged other commodity currencies and may have some chance to catch up in the days to come.
With little in the way of domestic data this week, Stretch expects the currency's moves to remain limited. US retail sales, which fell unexpectedly in January amid unseasonably cold weather, could be one potential driver later this week.
Canadian government bond prices were higher across the maturity curve, with the two-year bond up 1 Canadian cent to yield 1.036 percent and the benchmark 10-year gained 9 Canadian cents to yield 2.488 percent.
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