C$ hits weakest since March as lower oil, rate divergence weigh
By Alastair Sharp
TORONTO (Reuters) - The commodity-linked Canadian dollar on Monday hit its weakest level against its U.S. counterpart since March, hurt by a slide in oil prices and the prospect that interest rates will rise faster in the United States than Canada.
Traders and strategists said the Canadian currency could face further selling pressure in the short term, especially if the U.S. Federal Reserve strikes a hawkish tone later this week.
"This market seems quite comfortable being long the U.S. (dollar), certainly against Canada," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"Oil's lower, equities are lower, interest rates are diverging between the U.S. and Canada, so from a number of different metrics the market is potentially poised to take the U.S. dollar higher against the Canadian dollar," he added.
The Canadian dollar CAD=D4 settled at C$1.3220 to the greenback, or 75.64 U.S. cents, weaker than the Bank of Canada's official Friday close of C$1.3146, or 76.07 U.S. cents.
The price of oil, a major Canadian export, fell more than 2 percent, with U.S. crude hitting a three-month low, on rising concerns that a global glut of crude and refined products would pressure markets. [O/R]
"Fundamentals, sentiment, and technical factors favor" the U.S. dollar over the Canadian currency, Scotiabank strategists wrote in a note, adding they expect to see a "decisively neutral Bank of Canada and a tentatively, cautiously hawkish Fed".
The Fed's policy committee holds a two-day meeting on Tuesday and Wednesday this week, with a statement due at its conclusion. Continued...