TORONTO (Reuters) - The Canadian dollar extended losses against its U.S. counterpart on Wednesday, hitting its weakest level in more than a month as prices for oil, a major Canadian export, fell sharply.
The slide in the value of the loonie came as oil settled almost 4 percent lower, with a surprising build in U.S. gasoline inventories and rising U.S. crude output undercutting efforts by other countries to reduce a global glut. [O/R]
The Canadian dollar CAD=D4 settled at C$1.3480 to the greenback, or 74.18 U.S. cents, much weaker than the Bank of Canada’s Tuesday close of C$1.3381, or 74.73 U.S. cents.
The move, which added to a sharp fall in the previous session, handed the loonie its weakest close since March 14.
But the move to the weak end of the C$1.30-C$1.36 range the currency has traded in since September does not point to a fundamental shift in its standing, according to one economist.
“Assuming oil doesn’t fall two bucks a day for the next two weeks I think we’ll stay in that range,” said Benjamin Reitzes, senior economist at BMO Capital Markets.
“There’s no reason to believe the Canadian dollar is going to weaken materially from here” absent a sustained sharp oil price fall, he said, pointing out the rate spreads against U.S bonds have moved in Canada’s favor recently and that the outlook for the domestic economy is much better than it was when the currency was last at similar levels in November and December.
Canadian government bond prices were lower across the maturity curve, with the price of the two-year CA2YT=RR down 1.5 Canadian cents to yield 0.706 percent and the benchmark 10-year CA10YT=RR fell 30 Canadian cents to yield 1.465 percent.
Reporting by Alastair Sharp; Editing by Paul Simao and Lisa Shumaker