The Canadian dollar weakened versus the US dollar on Friday, with the commodity currency hurt by a sharp drop in the price of crude oil a day after the US Federal Reserve decided to hold interest rates at near zero amid global uncertainty. The Canadian currency ended the North American session changing hands at C$1.3217 to the greenback, or 75.66 US cents, weaker than the Bank of Canada's official Thursday close of C$1.3174, or 75.91 US cents.
It had been as strong as C$1.3013 at one point, but gave up gains steadily throughout the session as oil fell. It gained 0.3 percent on the week. "The Canadian dollar has taken its tone from the directional bias in crude oil today, which is unambiguously lower," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
US crude prices fell 4.1 percent to $44.99 a barrel, while Brent crude lost 2.7 percent to $47.76. In Canada, the government reported inflation held steady in August, in line with expectations. "I think you need a pretty significant deviation (in inflation) to have it have a large impact on the currency, given that we're still working through the fallout from yesterday's (US Federal Reserve) meeting," said Andrew Kelvin, senior rates strategist at Toronto-Dominion Bank.
The Canadian dollar outperformed most of its currency counterparts, though not its commodity-related cousins the Australian and New Zealand dollars. Canadian government bond prices were higher across the maturity curve, with the two-year price up 4 Canadian cents to yield 0.460 percent and the benchmark 10-year jumping 65 Canadian cents to yield 1.462 percent. The Canada-US two-year bond spread was -21.8 basis points, while the 10-year spread was -67.2 basis points.
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