The Canadian dollar lost more than a cent against a broadly weaker US dollar and slumped anew versus the euro on Friday, and as oil skidded toward an 11-year low and dragged down resource-linked currencies. "There's been a wholesale shift out of commodity currencies today," said Jack Spitz, managing director of foreign exchange at National Bank Financial, pointing to weakness also in the Australian and New Zealand dollars and the Norwegian crown.
The loonie, as Canada's currency is colloquially known, shed some 2.7 percent of its value against the greenback this week as the US benchmark of crude broke through $40 a barrel and kept falling from there to settle at $35.62 a barrel. Oil is a major Canadian export.
"The price of crude oil is falling," Spitz said. "It's very important to Canada's economic health and it is falling, precipitously." The Canadian dollar ended the session at C$1.3742 to the greenback, or 72.77 US cents, sharply weaker than Thursday's close of C$1.3632, or 73.36 US cents and at its weakest level since mid-2004. Against the euro it weakened to C$1.5126, a 10-week low. Crude oil prices approached 11-year lows as the International Energy Agency (IEA) warned the global supply glut could grow. Spitz said momentum could take the loonie to C$1.40, perhaps as soon as the end of the year, and that it could weaken even further if crude falls below $30 a barrel.
A push above C$1.40 would be the currency's weakest level in more than 12 years. Investors were bracing for the US Federal Reserve to hike interest rates next week for the first time in nearly a decade, with attention moving beyond that policy decision to any hints on how quickly further increases could follow.
The US dollar fell on jitters ahead of the Fed meeting, which Spitz attributed mostly to squaring of short positions and repatriations in the euro and yen. Canadian government bond prices gained across the maturity curve, with the two-year price up 13 Canadian cents to yield 0.482 percent and the benchmark 10-year rising 72 Canadian cents to yield 1.408 percent. Canada's newly elected Liberal government said it would force people eyeing expensive homes to provide bigger down payments, a bid to cool parts of a hot housing market some fear is developing into a bubble.