TORONTO (Reuters) - The Canadian dollar extended its losses, falling to a near seven-week low against its U.S. counterpart on Wednesday as escalating global trade tensions worried investors.
A year-long U.S.-China trade war has boiled over as Washington accused Beijing this week of manipulating its currency after China let the yuan drop to its lowest point in more than a decade.
Canada exports many commodities, including oil, so its economy could be hurt by an escalation of trade tensions.
At 9:11 a.m. (1311 GMT), the Canadian dollar CAD=D4 was trading 0.5% lower at 1.3336 to the greenback, or 74.99 U.S. cents. The currency hit its lowest intraday level since June 19 at 1.3344.
Last month, the Bank of Canada highlighted the risks that trade wars pose to the global economy as it left its benchmark interest rate unchanged at 1.75%.
Chances of a Bank of Canada interest rate cut this year have climbed to more than 90% from about 40% after the release of data last week showing the economy strengthened more than expected in June, the overnight index swap market indicated. BOCWATCH.
New Zealand’s NZD=D3 dollar fell heavily on Wednesday after its central bank stunned markets with an aggressive interest rate cut and said negative rates were possible, fuelling bets on more global easing.
Meanwhile, the price of oil, one of Canada’s major exports, extended recent heavy losses as rising global trade tensions weighed on the outlook for global energy demand.
U.S. crude oil futures CLc1 were down 2.4% at $52.32 a barrel.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. treasuries. The two-year CA2YT=RR rising 14.5 Canadian cents to yield 1.277% and the 10-year CA10YT=RR was up 90 Canadian cents to yield 1.146%.
The two-year bond yield hit its lowest intraday level since September 2017 at 1.277%.
Reporting by Levent Uslu; Editing by Nick Zieminski