OTTAWA (Reuters) - The Canadian dollar fell to a more than five-year low against the greenback on Tuesday, breaking through the C$1.14 level as oil prices slumped and the European Commission cut its growth forecasts.
Domestic data that showed Canada had posted an unexpected trade surplus in September helped the loonie cut some of its declines as it pulled back from a session low touched just before the figures were released. Still, the Canadian dollar was hit hard by a sharp drop in oil prices after Saudi Arabia cut sales prices to the United States. U.S. crude CLc1 was down $1.56 at $77.22 a barrel. [O/R]
It’s “the general consensus from the market that Canada is linked to oil and oil has been tumbling, so that’s what’s led to the decline in the value of the loonie,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
Risk appetite in the markets was also dampened after the European Commission cut its forecasts for the euro zone’s economy and said the region would need another year to reach even a modest level of economic growth.
The Canadian dollar CAD=D4 was at C$1.1407 to the greenback, or 87.67 U.S. cents, weaker than Monday’s close of C$1.1357, or 88.05 U.S. cents.
The currency touched a session low of C$1.1429 in morning trade, its lowest level since July 2009.
The loonie could fall as far as the C$1.16 area in the short to medium term if oil prices continue to decline and economic figures from the United States look supportive, Smith said.
“I don’t see there being much in the way to stem the loonie’s decline, other than natural over-extension,” he said.
Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR up 1-1/2 Canadian cents to yield 0.985 percent and the benchmark 10-year CA10YT=RR up 5 Canadian cents to yield 2.038 percent.
Editing by Lisa Von Ahn