Canadian dollar weakens ahead of Bank of Canada rate decision on Wednesday

Mon Mar 7, 2016 5:13pm EST
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TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday, but held near three-month highs as oil prices rose and ahead of a Bank of Canada monetary policy decision on Wednesday.

The currency has rebounded roughly 10 percent since hitting a 12-year low in January at C$1.4689.

The rally has likely caught the Bank of Canada's attention, according to a research note this morning from RBC Capital Markets.

An excessively quick strengthening of the currency could hinder a pick-up in exports that appears to be underway.

Data on Friday showed exports rose for a third consecutive month.

That provided "more confidence that the rotation of growth to exports from consumption and housing is taking root," BMO Capital Markets said in a research note on Monday.

The unwinding of bearish bets by speculators has added to support for the currency.

Net short Canadian dollar positions decreased to 30,478 contracts in the week ended March 1 from 36,940 the prior week, Commodity Futures Trading Commission data showed on Friday. It reached a five-month high in January.

U.S. crude CLc1 prices were up 2.06 percent to $36.66 a barrel.   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