4 Min Read
* Ends at C$1.0650 to the U.S. dollar, or 93.90 U.S. cents
* C$ dragged down by weak global stocks, oil
* Bond prices firmer across curve (Updates to close, adds quotes, details)
By Jennifer Kwan
TORONTO, July 5 (Reuters) - The Canadian dollar weakened against the U.S. dollar on Monday as commodity prices fell on persistent concerns about a slowdown in global growth.
Weak world equity and oil prices -- key barometers of global growth outlook and investor risk appetite -- helped to send the currency as low as C$1.0678 to the U.S. dollar, or 93.65 U.S. cents, its weakest level since June 7. [MKTS/GLOB] [O/R] [FRX/]
Recent data showing the U.S. labor market shrank in June for the first time this year, coupled with slower Chinese manufacturing activity and euro zone austerity measures, fueled concerns over prospects for the global economy.
"The outlook is quickly shifting to what the expectations are for the Bank of Canada on July 20 as well as how the downshift in global growth is going to impact the Canadian economy generally," said Camilla Sutton, currency strategist at Scotia Capital.
Canada's central bank raised its key interest rate to 0.5 percent from 0.25 percent on June 1 but has given no hints as to its next move, scheduled for July 20. Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, showed the market sees a 56 percent chance of a July rate hike. [BOCWATCH]
The Canadian dollar finished at C$1.0650 to the U.S. currency, or 93.90 U.S. cents, down from Friday's finish at C$1.0624 to the U.S. dollar, or 94.13 U.S. cents.
Less than three months ago, the U.S. and Canadian currencies were trading one for one, but the shift in recovery expectations and turmoil in Europe have since weighed on Canadian dollar.
Sutton said given the global backdrop, key technical levels to watch out for include C$1.0680 to the U.S. dollar and C$1.0828.
"It just highlights that there is still upward momentum in dollar/Canada and that it does then open up a test back to the C$1.08 levels," she said.
"That becomes very significant if we're able to have enough momentum to push us through there. That would really indicate a shift in momentum for dollar/Canada."
Trading was also thin on Monday because of the U.S. Independence Day holiday.
"A huge liquidity provider is absent and that just allows trades to skew one way or the other," said Sutton.
Canadian government bond prices rose across the curve as money flowed from equity markets and investors sought the safety of government debt.
The two-year government bond CA2YT=RR climbed 7 Canadian cents to yield 1.409 percent, while the 10-year bond CA10YT=RR rose 20 Canadian cents to yield 3.081 percent.
On the data front, the key event will be Friday's domestic employment figures for June, which are expected to show 15,000 jobs were added in the month, with the unemployment rate staying steady at 8.1 percent. [ID:nN02188375] (Reporting by Jennifer Kwan; editing by Rob Wilson)