TORONTO (Reuters) - Canada’s dollar eased against its U.S. counterpart on Wednesday, hurt by a decline in oil and other commodity prices, even as it made gains against the euro and some other major currencies.
Overseas, the euro erased gains as investors waited to see whether Spain would apply for aid and trigger the European Central Bank’s bond-buying program. <FRX/>
Meanwhile, the Bank of Japan was the latest major central bank to ease its monetary policy. The BOJ increased asset purchases by more than double what some had expected. Overnight, the yen weakened to a four-month low of 81.42 yen to the Canadian dollar before recovering.
“I’m impressed at the way the Canadian dollar is holding up in a risk-off day that today seems to be shaping up to be,” said Firas Askari, head of foreign exchange trading at BMO Capital Markets, noting the softer euro, and easing crude and gold prices.
“At the end of the day, Canada isn’t really the front story. it’s getting a little sidetracked on crosses but generally people are still buying Canada on the crosses.”
At 9:45 a.m. EDT (1345 GMT), the Canadian dollar was trading at C$0.9757 versus the U.S. dollar, or $1.0249. It finished Tuesday’s North American session at C$0.9746, or $1.0261.
“My sense is Canada should weaken off a little bit from these levels, but I am surprised by the amount of Canadian dollar buyers we are seeing every time we get above C$0.9750.”
Askari said fundamentally, the currency should be trading closer to the C$0.98 and C$0.9850 range. But with Canada being the only member of the Group of Seven wealthy nations that has a central bank with a tightening bias, he said the currency is attracting international capital flows.
Canadian government bond prices rose across the curve. The two-year bond climbed 3 Canadian cents to yield 1.164 percent, while the benchmark 10-year bond gained 20 Canadian cents, yielding 1.893 percent.
Editing by Jeffrey Hodgson