November 30, 2018 / 9:36 PM / 8 months ago

Canadian dollar dips on potential rate hike caution due to lower oil prices

TORONTO (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday as investors bet that lower oil prices, and data showing slower economic growth, would trigger greater caution from the Bank of Canada about raising interest rates.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

At 3:31 p.m. (2031 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at 1.3293 to the greenback, or 75.23 U.S. cents. The currency, which on Wednesday touched a five-month low at 1.3360, traded in a range of 1.3273 to 1.3334.

For the week, the loonie fell 0.4 percent, while it was down 1 percent for the month.

“One of the reasons you are seeing the Canadian dollar a little weaker here is that you have energy prices a little lower today,” said Scott Lampard, head of global markets, at HSBC Bank Canada.

“Whether it is the absolute level (of oil) or the ongoing weakness you are seeing, I think it’s creating an expectation that the bank (Bank of Canada) is going to be a little bit more cautious to raise rates going forward,” Lampard said.

The central bank has raised interest rates five times since July 2017. Chances of another hike as soon as next week have slumped to about 10 percent from 30 percent earlier in the month, data from the overnight index swaps market showed.

The price of oil, one of Canada’s major exports, has fallen about 34 percent since October, pressured by concerns of oversupply.

On Friday, U.S. crude oil futures settled 1 percent lower at $59.93 a barrel despite expectations that the Organization of the Petroleum Exporting Countries (OPEC) and Russia would agree some form of production cut next week.

Canada’s economy grew at an annualized rate of 2.0 percent in the third quarter, matching analysts’ forecasts, data from Statistics Canada showed.

But some market players were disappointed by the composition of the data and a contraction in gross domestic product for the month of September.

The leaders of Mexico, Canada and the United States signed the revamped North American trade pact Friday, which could reduce uncertainty for Canada’s economy. But there was little market reaction, with investors focused on U.S.-China trade talks at the G20 meeting in Buenos Aires.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR climbed 27 Canadian cents to yield 2.272 percent.

Reporting by Fergal Smith; editing by Jonathan Oatis and Tom Brown

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