Canadian dollar weakens to one-week low on data, losses pared as oil rises
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened to a one-week low against its U.S. counterpart on Tuesday after disappointing Canadian trade data and as risk appetite deteriorated, although losses were pared as oil prices turned higher.
Canada's trade deficit unexpectedly jumped to C$1.91 billion ($1.45 billion) in February from C$628 million in January as exports slumped by their most in nearly seven years.
"It suggests to me that the momentum that we seemed to have at the turn of the year in the economy is again going to be a false dawn," said HSBC Bank Canada Chief Economist David Watt.
The implied probability of a Bank of Canada rate cut this year rose to 24 percent from 17 percent before the data. It had been above 50 percent a little more than one month ago. BOCWATCH
The data fed anxiety that the near 12 percent rebound in the Canadian dollar from a 12-year low in January at C$1.4689 will hinder rebalancing of Canada's economy toward non-energy exports.
"Not cause for panic yet, but I think some concern which may be echoed by the Bank of Canada next week," said Scott Smith, senior market analyst at Cambridge Global Payments.
The risk-sensitive, commodity-driven currency had already weakened before the trade data as investors sought refuge in safe-haven assets such as the Japanese yen and gold.
However, U.S. crude CLc1 prices settled at $35.89 a barrel, up 0.5 percent, after Kuwait said an output freeze by major oil producers would proceed without Iran. Continued...