Canadian dollar falls as crude oil prices, stock market losses weigh

Tue Feb 2, 2016 5:23pm EST
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday, pulling back from a nearly four-week high as lower crude oil prices and stock market losses weighed on the risk-sensitive commodity currency.

Oil prices CLc1 LCOc1 sank for a second day as hopes for a deal between OPEC and Russia on output cuts faded and concerns rose about mild winter weather dampening demand.

The loonie, as Canada's currency is colloquially known, had strengthened on Monday despite the lower oil price.

Stocks slid worldwide after three days of gains. Canada's main index .GSPTSE fell 1.8 percent, with its energy sector off 3.5 percent.

The Canadian dollar CAD=D4 ended the session at C$1.4027 to the greenback, or 71.29 U.S. cents, weaker than Monday's official close of C$1.3930, or 71.79 U.S. cents.

The move came against a broadly weaker greenback .DXY, which tumbled against the yen JPY= and slipped against the euro EUR= as oil's fall added to concerns about global economic growth.

Mazen Issa, a senior foreign exchange strategist at Toronto-Dominion Bank, said the Canadian currency appears comfortable trading in a C$1.40-C$1.45 range and that oil may be giving up some of its influence over the currency to U.S.-Canada interest rate spreads, which have tightened in recent days.

"It's still very much a fluid, raw risk, but it's very interesting to note the rate spreads growing in significance in terms of being a driver for the currency," Issa said.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch