TORONTO: The Canadian dollar slumped to a six-week low against its US counterpart on Friday before paring its decline, as a sell-off in global stock markets offset the boost the loonie got earlier in the week from a Bank of Canada interest rate hike.
Stock markets around the world fell as better-than-expected US economic data did little to ease anxiety over disappointing corporate profits and trade wars.
Canada runs a current account deficit and exports many commodities, so its economy could suffer if the flow of trade or capital slows.
"It has been quite choppy," said Andrew Kelvin, senior rates strategist at TD Securities. "This very negative sentiment around equities combined with the fact that you've had this hawkish surprise from the Bank of Canada, it creates counteracting influences on Canadian fixed income and on the currency."
Canada's central bank on Wednesday raised its key interest rate by 25 basis points to 1.75 percent, its fifth hike since July 2017, and said it might speed up the pace of future hikes given that the economy was running at almost full capacity and did not need any stimulus.
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