TORONTO (Reuters) - The Canadian dollar suffered its biggest drop in a month against a broadly firmer greenback on Wednesday, as oil prices fell and investors cut bullish bets on the loonie ahead of a Bank of Canada interest rate decision next week.
At 5 p.m. EDT (2100 GMT), the Canadian dollar CAD=D4 was trading at C$1.2622 to the greenback, or 79.22 U.S. cents, down 0.9 percent, its deepest loss since July 27.
“I kind of expected a clean-out trade at some point before next Wednesday (when the Bank of Canada announces its rate decision), said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets. “We got it a bit early.”
Speculators have been long the Canadian dollar for six straight weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations show.
Canada’s central bank raised rates in July for the first time in nearly seven years. It is expected to wait until October before hiking again, data from the overnight index swaps market shows. BOCWATCH
The country’s gross domestic product data for the second quarter is due on Thursday. The economy likely saw strong second-quarter growth, which could strengthen the case for another hike in the coming months.
The loonie’s strongest level of the session was C$1.2501, while it touched its weakest since Aug. 18 at C$1.2637.
Losses for the loonie came as Mexico sees a serious risk the United States will withdraw from the North American Free Trade Agreement.
Canada sends 75 percent of its exports to the United States and could suffer badly if NAFTA is abandoned.
The U.S. dollar .DXY rallied against a basket of major currencies after strong U.S. economic data boosted expectations for a solid U.S. jobs report on Friday.
Prices of oil, one of Canada’s major exports, slid as flooding and damage from Tropical Storm Harvey shut nearly a quarter of U.S. refinery capacity, curbing demand for crude.
U.S. crude CLc1 prices settled 1 percent lower at $45.96 a barrel.
Canada’s current account deficit widened to C$16.32 billion in the second quarter from a revised C$12.92 billion deficit in the first quarter as imports of goods saw the largest quarterly growth in nine years.
Canadian government bond prices were little changed across the yield curve, with the 10-year CA10YT=RR flat to yield 1.836 percent.
Reporting by Fergal Smith; Editing by Chizu Nomiyama and Tom Brown