The Canadian dollar clawed back most of its losses against the greenback on Monday, as oil rose and investors braced for top-tier domestic data and a U.S. Federal Reserve interest rate decision later in the week. The loonie has fallen nearly 6 percent since notching a two-year high at C$1.2063 in September, pressured by a more dovish tone from the Bank of Canada.
The central bank, which raised interest rates in July and September, left its policy rate at 1 percent last week and cooled expectations for another hike this year. But the currency has found some support after hitting on
Friday a more than three-month low at C$1.2916. “What’s holding the Canadian dollar in check here right now are commodities,” said Jeff Scott, senior currency strategist at OFX.
U.S. crude futures closed at a peak not seen since February, settling 0.5 percent higher at $54.15 a barrel, on expectations that Organization of the Petroleum Exporting Countries-led production cuts would be extended beyond March. Oil is one of Canada’s major exports.
A dearth of fundamental drivers until later in the week is also helping the loonie stabilize, Scott said. Canada’s gross domestic product data for August is set for release on Tuesday, while the October employment report and trade data for September are due on Friday. The U.S. Federal Reserve will make an interest rate decision on Wednesday.
At 4 p.m. ET (2000 GMT), the Canadian dollar was trading at C$1.2822 to the greenback, or 77.99 U.S. cents, down 0.1 percent. It traded in a range of C$1.2812 to C$1.2861.
Negotiations over a deal to update the North American Free Trade Agreement have included some “troubling proposals” from the United States, Canadian Foreign Minister Chrystia Freeland said. The U.S. dollar fell against a basket of major currencies as investors grew cautious on news that President Donald Trump’s former campaign manager faces charges of conspiracy against the United States.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries, as investors weighed news reports indicating that Trump is likely to appoint Fed Governor Jerome Powell, who is viewed as more dovish than other contenders, as head of the Fed.
The two-year rose 4 Canadian cents to yield 1.405 percent and the 10-year climbed 26 Canadian cents to yield 1.956 percent, its lowest since Sept. 8.