December 20, 2018 / 8:37 PM / 5 months ago

Canadian dollar lags other G10 currencies as oil prices slump

TORONTO (Reuters) - The Canadian dollar was little changed against the greenback Thursday but hit a 1-1/2-year low earlier in the session and underperformed other G10 currencies, as investors worried that the slumping price of oil could hurt Canada’s economy.

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

Oil prices hit their lowest in more than a year on worries about oversupply and the outlook for energy demand, as a Federal Reserve interest rate increase the day before knocked stock markets. U.S. crude oil futures CLc1 settled 4.8 percent lower at $45.88 a barrel.

“We have hit the pain threshold in oil,” said Adam Button, chief currency analyst at ForexLive. “Much of the Canadian oil patch goes underwater at these levels, and it is going to mean curtailment in production and investment.”

Earlier this month, the Bank of Canada expressed concern about the outlook for Canada’s energy sector when it left its benchmark interest rate on hold at 1.75 percent.

The central bank has hiked five times since July 2017. But bets on further tightening from the central bank crumbled after the policy announcement, which was perceived as dovish.

“For the Bank of Canada, the conundrum is that backward-looking data is strong still, while forward-looking indications for markets, (such as) commodity prices, some data are weak,” Button said.

Canadian wholesale trade increased by 1.0 percent in October from September, Statistics Canada said. Analysts had forecast a 0.4 percent increase.

A separate report from ADP showed that Canada added 39,100 jobs in November.

Canadian gross domestic product and retail sales data for October is due on Friday. Also on Friday, the Bank of Canada will release the winter issue of the Business Outlook Survey.

At 3:15 p.m. (2015 GMT), the Canadian dollar CAD=D4 was trading nearly unchanged at 1.3491 to the greenback, or 74.12 U.S. cents. The currency, which was the only G10 currency not to gain ground against the greenback, touched its weakest level since June 2017 at 1.3530.

The U.S. dollar .DXY fell to a one-month low against a basket of six major currencies on growing concerns the Fed may be hiking interest rates just as the world’s biggest economy faces a slowdown.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR fell 15 Canadian cents to yield 1.979 percent.

The 10-year yield touched its lowest intraday since Dec. 20, 2017 at 1.944 percent.

Reporting by Fergal Smith; Editing by Bernadette Baum

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