Canadian dollar falls as oil prices slump, Wall Street suffers

TORONTO (Reuters) - The Canadian dollar hit a fresh four-week low against a broadly weaker U.S. currency on Thursday, hurt by sharp losses on Wall Street and a fall in the price of oil as U.S.-North Korea tensions escalated.

FILE PHOTO: U.S. and Canada Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

The S&P 500 index had its biggest one-day drop since May as investors fled riskier assets, while prices for oil, a major Canadian export, fell more than 1.5 percent.

U.S. President Donald Trump ratcheted up his rhetoric toward North Korea, saying it should be “very, very nervous” if it even thinks about attacking the United States or its allies, after Pyongyang said it was making plans to fire missiles over Japan to land near the U.S. Pacific territory of Guam.

As a major commodity producer, Canada could be hurt if geopolitics hampers global trade.

At 4 p.m. ET (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.2741 to the greenback, or 78.49 U.S. cents, down 0.4 percent and its weakest since July 14.

That come even as the greenback hit an eight-week low against the Japanese yen and other currencies seen as safe havens.

The loonie has pulled back against the U.S. currency in recent weeks after hitting its strongest since mid-2015 at C$1.2414 late last month as investors adjusted to a more hawkish turn from the Bank of Canada.

But the weakness could be hitting its limit.

“I’d be surprised to see us trade through C$1.30 anytime in the near future,” said Steve Butler, director of foreign exchange trading at Scotiabank. “You’re still going to find demand for Canadian dollars” particularly from exporters, he said.

New housing prices in Canada rose less than expected in June as the Toronto market was unchanged for the first time in six months following provincial government measures to rein in gains, data from Statistics Canada showed.

Investors worry that a cooling in the housing market could weigh on Canada’s economy and slow the pace of additional interest rate hikes.

Canadian government bond prices were higher across the yield curve, with the benchmark 10-year CA10YT=RR bond rising 46 Canadian cents to yield 1.853 percent and the two-year adding 3.5 Canadian cents to yield 1.223 percent.

Additional reporting by Fergal Smith; Editing by W Simon and Chris Reese