TORONTO (Reuters) - The Canadian dollar hit a fresh 14-month low against its U.S. counterpart on Thursday as lower oil prices weighed, offsetting relief after U.S. President Donald Trump told Canada and Mexico that Washington wanted to renegotiate, rather than leave, NAFTA.
The loonie, as Canada’s currency is colloquially known, has been buffeted by trade rhetoric and actions this week, including the imposition of U.S. import duties on Canada’s softwood lumber.
The currency CAD=D4 ended the session trading at C$1.3624 to the greenback, or 73.40 U.S. cents, slightly weaker than the Bank of Canada’s official Wednesday close of C$1.3612, or 73.46 U.S. cents.
It touched C$1.3670, its weakest since Feb. 25, 2016, during the session as lower oil prices weighed.
Crude prices fell more than 1 percent as the restart of two key oilfields in Libya pumped more crude into an already bloated market. [O/R]
The currency had fallen on Wednesday after a U.S. official said the White House was considering a draft executive order to withdraw from the North American Free Trade Agreement (NAFTA), which binds the United States, Canada and Mexico.
On Thursday, Trump wrote on Twitter that he had spoken with the leaders of Canada and Mexico who asked to renegotiate the trade pact. He added: “Relationships are good - deal very possible!”[L1N1HZ0LD]
Don Mikolich, executive director for foreign exchange sales at CIBC Capital Markets, said the political back-and-forth had overshadowed economic fundamentals as a driver for the currency.
He said he expected a strong Canadian gross domestic product number for February when the data is released on Friday.
“If we can get back to the fundamentals a rally back to the mid-to-low C$1.35s is possible, but it’s hard to see us push much beyond that with $49 oil,” he said.
Canadian government bond prices were little changed across the maturity curve, with the two-year CA2YT=RR flat to yield 0.735 percent and the benchmark 10-year CA10YT=RR rising 2.8 Canadian cents to yield 1.572 percent.
Editing by W Simon and Sandra Maler