C$ weakens to three-week low as Brexit shockwaves weigh

Mon Jun 27, 2016 4:47pm EDT
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to a three-week low against its U.S. counterpart on Monday as Britain's vote to leave the European Union sent new shockwaves through financial markets, weighing on Canada's risk-sensitive currency.

Global stocks and oil prices fell as market participants absorbed the shock of Brexit. U.S. crude oil futures CLc1 settled $1.31 lower at $46.33 a barrel. [O/R]

"More blood-letting in the market and as such the Canadian dollar is tracking the movement of oil and other risk-correlated assets," said Scott Smith, senior market analyst at Cambridge Global Payments.

Losses for the loonie came after it fell 1.7 percent on Friday, its largest drop in 17 months.

Canada's commodity-linked economy will suffer weaker growth because of Britain's vote to leave the EU, which has put the prospect of Canadian interest rate cuts back on the table.

Overnight index swaps implied a nearly one-third chance of a Bank of Canada rate cut this year after having been priced for no change in policy before Brexit. BOCWATCH

The Canadian dollar CAD=D4 ended at C$1.3073 to the greenback, or 76.49 U.S. cents, weaker than Friday's close of C$1.2999, or 76.93 U.S. cents.

The currency's strongest level of the session was C$1.2951, while it hit its weakest since June 2 at C$1.3120.   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