The Canadian dollar weakened against its US counterpart and most other global currencies on Tuesday, with uncertainty about the resiliency of economic growth in the face of a slower China and divided Europe weighing on the risk-sensitive loonie. The retreat followed five sessions of gains that had lifted the currency to a 10-day high on Monday, when US markets were closed. Canadian markets were closed on Friday.
Overnight data from China showed that while the country's growing services sector saw activity rise to an 11-month high in June, a composite measure of activity including manufacturing fell to a four-month low. At 9:14 am EDT (1314 GMT), the Canadian dollar was trading at C$1.2942 to the greenback, or 77.27 US cents, weaker than the Bank of Canada's official Monday close of C$1.2856, or 77.78 US cents.
Canadian government bond prices were higher across the maturity curve as investors sought safety, which also supported the greenback and Japanese yen at the expense of growth-sensitive commodity currencies such as the Canadian dollar. The two-year price was up 3 Canadian cents to yield 0.502 percent and the benchmark 10-year rose 27 Canadian cents to yield 1.017 percent.
The 10-year yield slumped as low as 0.961 percent during the session, its lowest since February. The equivalent US bond yield hit an all-time low, as soft data from China added to worries about the impact of Britain's vote to leave the European Union. A flurry of data for June from China in coming weeks is expected to show continued weakness in trade and investment, sluggish industrial output and another drop in foreign reserves.
Prices for oil, a major Canadian export, fell on concerns that demand could be dented by slower economic growth. "The domestic outlook has also deteriorated somewhat following Monday's release of the (Bank of Canada's) Business Outlook Survey, with sentiment described as 'subdued' as a result of the lingering impact of the oil price shock," currency strategists at Bank of Nova Scotia wrote in a note. The Canadian currency's strongest level of the session was C$1.2847, while its weakest level was C$1.2948.