TORONTO: The Canadian dollar weakened against its US counterpart on Wednesday, pressured by slumping crude oil prices, although the currency maintained its recent holding pattern ahead of the New Year's Day holiday on Friday.
"We are seeing the correlation with oil and the Canadian dollar hold pretty tight," said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary.
Reduction in risk appetite added to pressure on commodity currencies, including the Canadian dollar, according to Smith.
An unusual build in US crude stockpiles and signs Saudi Arabia will keep adding to the global supply glut pressured oil prices. US crude fell 3.4 percent while Brent crude lost 2.83 percent, moving toward 11-year lows.
The Canadian dollar ended at C$1.3885 to the greenback, or 72.02 US cents, weaker than Tuesday's close of C$1.3823, or 72.34 US cents.
The currency's strongest level of the session was C$1.3830, while its weakest was C$1.3927. It hit its weakest level in more than 11-years on Dec. 18 at C$1.4003.
Bank of Canada Governor Poloz will speak on Jan. 7 in Ottawa, the last scheduled appearance by a Bank of Canada policymaker before the release of the interest rate announcement and Monetary Policy Report on Jan. 20.
There is potential for a "dovish slant" due to depressed crude oil prices and the loss of momentum for growth, according to Smith.
Canadian government bond prices were mixed across the maturity curve, with the two-year price up 2 Canadian cents to yield 0.489 percent and the benchmark 10-year flat to yield 1.407 percent.
The curve steepened for as second straight day, as the spread between the 2-year and 10-year yields widened 1.3 basis points to 91.8 basis points, indicating underperformance for longer-dated maturities.
The Canada-US 10-year spread was little changed at -89.8 basis points, trading near a record wide gap.
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