The Canadian dollar closed at its weakest level against the greenback in 5-1/2 years on Friday as new worries over a drop in oil demand spurred by an International Energy Agency report sent crude prices plunging. The agency, which co-ordinates the energy policies of industrialised countries, forecast an increase in global supplies next year but cut its outlook for global oil demand by 230,000 barrels per day.
US crude prices have been nearly halved in the past six months, and they fell more than 3 percent on Friday as the market continued to hunt for an elusive bottom. Canada is a major oil exporter and the currency's sensitivity to crude prices has increased as oil prices have plunged. The country's main stock index, home to a hefty number of oil and gas producers, has dived more than 5 percent this week, while the index's energy subgroup has plummeted 13.4 percent.
"Really, the story and the catalyst for the Canadian dollar is that the loonie is just covered in oil. It's pretty much a blood bath," said Rahim Madhavji, president at KnightsbridgeFX.com. "It seems like there is no end in sight in the short term." The Canadian dollar ended the session at C$1.1572 to the greenback, or 86.42 US cents, its weakest close since July 10, 2009. It touched C$1.1591, or 86.27 US cents, earlier in the session. It had finished at C$1.1527, or 86.75 US cents, on Thursday. The currency has retreated 1.2 percent since last Friday. Canadian government bond prices were higher across the maturity curve, with the two-year rising 10 Canadian cents to yield 0.969 percent, and the benchmark 10-year jumping 59 Canadian cents to yield 1.7961 percent.
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