Commodity-linked Canadian dollar weakens as global data spook investors
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THE commodity-linked Canadian dollar weakened against its US counterpart on Friday (Jun 23), pulling back from a nine-month high, as global business data pointed to a slowdown in economic activity. The loonie was trading 0.3 per cent lower at 1.3193 to the greenback, or 75.80 US cents, after moving in a range of 1.3144 to 1.3225. On Thursday, it touched its strongest since September at 1.3136. For the week, it was unchanged.
“Sentiment across global markets has turned bearish ahead of the weekend with investors reacting negatively to flash manufacturing and service PMI reports,” Colin Cieszynski, chief market strategist at SIA Wealth Management, said in a note.
Eurozone business growth stalled this month as a manufacturing recession deepened and a previously resilient services sector barely grew, while a measure of US business activity fell to a three-month low.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global economic outlook. Oil settled 0.5 per cent lower at US$69.16 a barrel as traders worried that interest rate hikes could sap demand, while the US dollar rallied against a basket of major currencies.
Investors were awaiting the release on Tuesday of Canada’s May inflation report which could offer clues on the Bank of Canada (BOC) policy outlook. Inflation is expected to slow to an annual rate of 3.4 per cent from 4.4 per cent in April.
“The Canadian economy remains relatively robust – in contrast to a backdrop of slowing global growth momentum as tighter monetary policy bears down on activity – and the potential for tighter BOC policy in July remains real,” Shaun Osborne, chief currency strategist at Scotiabank, said.
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Canada’s 10-year yield fell nine basis points to 3.364 per cent after touching on Thursday a near three-month high intraday at 3.495 per cent. REUTERS
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