The Canadian dollar was a touch weaker against its US counterpart on Friday, as US crude prices fell and traders speculated whether the oil rally over the last several weeks was petering out. US crude futures have jumped nearly 30 percent since late March even as US oil inventories remain near 80-year highs, prompting some market participants to believe the market is headed for a correction.
The Canadian dollar has been heavily driven by the price of crude, a major Canadian export. The softer loonie came even as the greenback, another key driver, was under pressure after data showed industrial production unexpected fell for a fifth straight month in April, slipping 0.3 percent.
Other numbers showed a drop in consumer confidence to a seven-month low and only a mild rebound in factory activity in New York state. "(It) reinforced the fact that US data has been soft of late," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital markets. "The hoped-for rebound in the second quarter, after what looks like is going to be a negative first quarter, may not be as strong as hoped." Reitzes said it was still early in the quarter, however.
The Canadian dollar finished at C$1.2022 to the greenback, or 83.18 US cents, softer than the Bank of Canada's official close of C$1.1999, or 83.34 US cents, on Thursday. It was weaker than most other currency counterparts, but was about 0.4 percent stronger on the week. In Canada, manufacturing sales rebounded by 2.9 percent in March from February, stronger than the 1.2 percent rise economists had forecast. Foreign investment in Canadian securities jumped to C$22.47 billion in March, the biggest inflow since May 2012.
Looking ahead, markets will be keen to see what Bank of Canada governor Stephen Poloz will have to say about how US growth will impact Canada. "I wouldn't be surprised if he sounded meaningfully more cautious on Tuesday, based on that softer US growth outlook," said Reitzes. "They have to be looking at a downgrade to their US forecast. That's clearly a downside risk to Canadian growth." Canadian government bond prices were higher across the maturity curve, with the two-year price up 5 Canadian cent to yield 0.646 percent and the benchmark 10-year rising 84 Canadian cents to yield 1.714 percent. The Canada-US two-year bond spread was 10.6 basis points, while the 10-year spread was -43.7 basis points.
Comments
Comments are closed.