The Canadian dollar touched its weakest level in more than 11 years against the greenback on Wednesday, following July domestic retail sales figures that fell short of expectations and another plunge in volatile oil prices. New car and clothing sales helped push Canadian retail sales higher for the third month in a row in July, up 0.5 percent and in line with economists polled by Reuters, but sales were flat and below expectations when automotive figures were excluded. Volumes were also weaker than the headline, while figures from the previous month were revised lower.
"People had been thinking that we'd get a decent contribution to the next quarter's GDP growth and show some positive data," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets, adding that the soft data also underscored the interest rate differential between Canada and the United States. "In a quiet week of data, that one sticks out as having a bit of a negative sentiment around the economy here. (Oil's) the other big driver." The loonie has plunged some 25 percent since last summer, along side the price of crude, a key Canadian export, but had been mostly rangebound over the last month after hitting a previous 11-year low at C$1.3353 to greenback.
The price of crude, a key Canadian export, reversed course during the session to give up an earlier rally after large gasoline builds raised concerns about high autumn fuel supplies. Brent, the global benchmark for oil, settled down $1.33, or 2.7 percent, at $47.75 a barrel. US crude slumped $1.88, or 4.1 percent, to settle at $44.48. The Canadian dollar ended at C$1.3347 to the greenback, or 74.92 US cents, softer than the Bank of Canada's official close of C$1.3258, or 75.43 US cents on Tuesday. It stumbled to C$1.3357, or 74.87 US cents just after midday, its weakest intraday trading level since late July, 2004.
Mikolich said the currency could soften to C$1.35, but expects to see some fatigue as it approaches C$1.34. Overseas, the latest data out of China showed the country's manufacturing sector had its biggest contraction since the global financial crisis. The country's September factory PMI figures intensified concerns that a slowdown in world's second-largest economy could spread. Canadian government bond prices were lower across the maturity curve, with the two-year price down 4 Canadian cents to yield 0.519 percent and the benchmark 10-year off 9 Canadian cents to yield 1.489 percent. The Canada-US two-year bond spread was -18.0 basis points, while the 10-year spread was -66.4 basis points.
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