Canadian dollar weaker after Yellen remarks, U.S. oil weighs

Wed Feb 10, 2016 5:19pm EST
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar dipped against its U.S. counterpart on Wednesday as U.S. crude oil prices fell and Federal Reserve Chair Janet Yellen left the door open to further interest rate hikes.

Yellen cited global risks in her prepared testimony to Congress, but said she expects moderate growth that will allow the U.S. central bank to pursue "gradual" adjustments to monetary policy.

The yield on 10-year Canadian government bonds dipped below 1 percent for the first time ever as economic uncertainty swirled.

The Canadian dollar CAD=D4 ended the session trading at C$1.3933 to the greenback, or 71.77 U.S. cents, weaker than the Bank of Canada's official close on Tuesday of C$1.3879, or 72.05 U.S. cents.

It has weakened from C$1.38 at the start of the year to almost C$1.47 on Jan. 20 before returning to the C$1.38-C$1.40 range in recent days.

"The story is global dislocation and uncertainty," said Darcy Browne, managing director for foreign exchange sales at CIBC Capital Markets. "There's really no meaningful direction short term."

He said the reversal in dollar/Canada in recent weeks suggested the push to a 12-1/2-year low may have been overdone, while volatility is likely being exacerbated by some major market participants standing back to see where things settle.

Stock markets have sagged given uncertainty surrounding monetary policy and a steep decline in commodity prices, while corporate results and economic data offer little comfort.   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