TORONTO: The Canadian dollar weakened by the most in more than two weeks against its US counterpart on Monday, hurt by a sharp fall in Chinese shares that weighed on commodity-linked currencies and global stock markets.
The loonie, as Canada's currency is colloquially known, slumped to its lowest level against the Japanese yen since December 2012 as traders piled into the traditional low-risk currency after disappointing Chinese factory data sparked a selloff.
Chinese factory activity contracted for the 10th month running in December, adding to headwinds for commodity exporters such as Canada.
Canada's manufacturing sector meanwhile contracted for the fifth straight month as activity fell to a record low in December, data showed.
The price of oil, a major Canadian export, fell after an early rally as concern about Middle East tensions gave way to worries about slowing global economic growth.
"The year is starting out no different than the way we left it, with a possible domestic rate cut, the potential for underpriced US hikes, and then weak oil," said Darcy Browne, managing director of foreign exchange sales at CIBC Capital Markets.
The Canadian dollar ended the session trading at C$1.3941 to the greenback, or 71.73 US cents, much weaker than Thursday's close of C$1.3840, or 72.25 US cents.
The currency's traded between C$1.3815 and C$1.3983. It hit its weakest level in more than 11 years on Dec. 18 at C$1.4003.
"The trend is still there until it's broken, and we don't really see anything on the horizon that's going to change people's minds in the near-term," CIBC's Browne said, adding he expects the currency to average C$1.42 in the first quarter.
The loonie weakened by 16 percent in 2015, its worst performance since the global financial crisis of 2008.
Bank of Canada Governor Stephen Poloz will speak on Jan. 7 in Ottawa, the last scheduled appearance by a Bank of Canada policymaker before an interest rate announcement and Monetary Policy Report on Jan. 20.
The market has been leaning toward further rate cuts in the face of depressed crude oil prices and loss of momentum for growth.
Canadian government bond prices were marginally higher across the maturity curve, with the two-year price up 2 Canadian cents to yield 0.468 percent and the benchmark 10-year also rising 2 Canadian cents to yield 1.395 percent.
November trade data is scheduled for Wednesday and the December employment report is awaited on Friday.
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