C$ dips against weaker greenback as oil drops
By Alastair Sharp
TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as a drop in oil prices offset a pullback for the greenback against a basket of major currencies.
Oil was dragged lower by uncertainty over whether the Organization of the Petroleum Exporting Countries will reach an output deal, after Saudi Arabia said it will not attend talks on Monday with non-OPEC producers to discuss supply cuts. [O/R]
"The only story around today is that oil's 3 percent weaker and there was some profit-taking on long U.S. dollar positions," said Darcy Browne, managing director of foreign exchange sales at CIBC Capital Markets.
Oil is one of Canada's major exports.
The Canadian dollar CAD=D4 ended at C$1.3527 to the greenback, or 73.93 U.S. cents, weaker than Thursday's close of C$1.3491, or 74.12 U.S. cents. It dipped 0.1 percent on the week.
The losses for the loonie came as Canada's 10-year yield fell 2.7 basis points below its U.S. equivalent to leave a spread of -79.4 basis points. On Wednesday, the spread hit its widest in 10 months at -81.9 basis points.
A wider spread reduces investor incentive to buy lower-yielding Canadian bonds, trimming demand for Canadian dollars.
Browne said he expects further weakness for the currency, and is watching the 50 percent retracement of the January peak to May trough at C$1.3575, which it barely breached on Nov. 14. Continued...