TORONTO (Reuters) - The Canadian dollar weakened to its lowest in one week against the greenback on Wednesday, pressured by a sharp sell-off in the Australian dollar and as the Bank of Canada warned that U.S. trade uncertainty is hurting the economy.
The Australian dollar was on track for its biggest single day drop against the greenback in a year after the Reserve Bank of Australia signaled a possible interest rate cut in a stunning shift from its long-standing tightening bias.
Australia and Canada are major produces of commodities, so their currencies often move in the same direction.
The price of oil, one of Canada’s main products, fell after a report showed a rise in U.S. crude inventories, contrary to expectations the market will tighten in 2019 as a result of OPEC-led supply cuts and U.S. sanctions on Venezuela. U.S. crude prices were down 0.7 percent at $53.29 a barrel.
Uncertainty over U.S. trade policies is holding back Canadian business investment despite strong economic fundamentals, Bank of Canada Deputy Governor Timothy Lane said.
At 9:43 a.m. (1443 GMT), the Canadian dollar was trading 0.4 percent lower at 1.3175 to the greenback, or 75.90 U.S. cents. The currency touched its weakest intraday level since last Wednesday at 1.3207.
Still, the Canadian dollar will extend this year’s rally over the coming 12 months, according to a Reuters poll of currency strategists who expect the U.S. dollar to broadly fall and for global monetary policy to stay looser than previously expected.
After dropping 7.8 percent last year, the loonie has rallied 3.6 percent since the start of 2019, which makes it the top-performing G10 currency.
The value of Canadian building permits increased by 6.0 percent in December from November, Statistics Canada said on Wednesday, surprising analysts who had expected a decrease of 1.0 percent.
Canada’s employment report for January is due on Friday.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 3 Canadian cents to yield 1.811 percent and the 10-year climbed 17 Canadian cents to yield 1.919 percent.
Reporting by Fergal Smith; Editing by Steve Orlofsky