Canadian dollar extends skid as oil prices fall
By Frank Pingue
TORONTO (Reuters) - The Canadian dollar finished lower against the U.S. currency on Wednesday, dragged down by a slide in oil prices, follow-through from the unexpected Bank of Canada rate cut earlier this week, and a stronger greenback.
Domestic bond prices, with no Canadian data to consider, took their cue from the bigger U.S. treasuries markets and ended down after strong U.S. data.
The Canadian dollar closed at 98.49 U.S. cents, valuing each U.S. dollar at C$1.0153, down from 98.77 U.S. cents, or C$1.0124, at Tuesday's North American close.
A drop in oil prices to below $88 a barrel, due mainly to fears over the health of the U.S. economy, shook the Canadian dollar since Canada is a major producer and exporter of oil and its currency often follows crude prices.
The Bank of Canada's rate cut on Tuesday, which went against most expectations for the central bank to stand pat until January, also weighed on the domestic dollar as lower rates generally make a currency less attractive.
The drop in the Canadian dollar was magnified as the U.S. currency rallied after data showed robust jobs growth that suggested a milder economic slowdown than many had thought.
"There was a whole panoply of things undercutting the Canadian dollar," said Doug Porter, deputy chief economist at BMO Capital Markets. "And, in some sense, you could almost say it's a bit surprising it didn't weaken even more given the forces stacked against it today."
Since hitting a modern-day high of US$1.1039 on November 7, the Canadian dollar has retreated about 11 percent, due mainly to a sudden wave of weak domestic economic data, lower oil prices and concerns about the global economic picture. Continued...