Canadian dollar pulls back from one-week high as greenback recovers

Thu Jan 26, 2017 5:30pm EST
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday, pulling back from a one-week high as the greenback recovered some lost ground against a basket of major currencies.

The loonie had rallied this week as investor fears of a more unfavorable trade outlook for Canada abated and after U.S. President Donald Trump signed orders on Tuesday smoothing the path for the Keystone XL oil pipeline, but nervousness remains.

"For the moment the Mexican peso is taking the brunt of it, but there are still some spillover effects for the loonie," said Alphonso Esparza, senior market analyst at OANDA Corp. "It's a tweet-by-tweet anxiety, that the eye of Trump could settle on the loonie."

If constructed, Keystone would provide oil producers in Canada with a quicker route to send crude to U.S. Gulf Coast refiners. But analysts and traders said the C$8 billion pipeline was far from being a certainty.

The White House said on Thursday that Trump wants a new 20 percent tax on imports from Mexico to pay for a wall on the southern border, deepening a crisis after a planned summit between the two countries' leaders fell through.

Trump has said he will open a renegotiation of the NAFTA trade pact between the United States, Canada and Mexico at an "appropriate time".

The U.S. dollar .DXY rebounded after its worst run since August as investors refocused on the chances of higher U.S. inflation and growth.

The Canadian dollar CAD=D4 settled at C$1.3098 to the greenback, or 76.35 U.S. cents, weaker than Wednesday's close of C$1.3067, or 76.53 U.S.   Continued...

Canadian Loonies, otherwise known as a one dollar coin, are displayed on top of an American currency in this posed photograph in Toronto, October 10, 2008. REUTERS/Mark Blinch