November 28, 2014 / 2:33 PM / in 3 years

C$ weakens as falling oil prices outweigh robust GDP data

TORONTO (Reuters) - The Canadian dollar fell sharply against the U.S. dollar on Friday as tumbling U.S. crude prices was the dominant driver for the currency, overshadowing higher-than-expected third-quarter Canadian growth figures.

Crude oil prices hit a fresh four-year low following OPEC’s decision on Thursday to keep current production levels unchanged, a move market participants said would leave oil markets oversupplied. [O/R]

U.S. crude, in particular, was down nearly 6 percent from Wednesday’s finish. U.S. financial markets were closed on Thursday for the U.S. Thanksgiving holiday.

In Canada, strong exports, business investment and consumer spending helped lift the economy by an annualized 2.8 percent in the third quarter, eclipsing the 2.1 percent forecast by the market.

“Certainly this report on its own would provide a lift for the Canadian dollar ... however, the currency has been buffeted in recent days by the weakening in oil prices,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.

“Oil prices will probably be the more dominant factor.”

At 9:16 a.m., the Canadian dollar CAD= traded at C$1.1405 against the greenback, or 87.68 U.S. cents, weaker than Thursday’s close at C$1.1332, or 88.25 U.S. cents.

It briefly pared losses, touching a high of C$1.1360, or 88.03 U.S. cents, immediately after the GDP report was released, but quickly retreated back to earlier session levels.

Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR rising 7 Canadian cents to yield 0.992 percent and the benchmark 10-year CA10YT=RR climbing 7 Canadian cents to yield 1.891 percent.

Editing by Jeffrey Benkoe

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