Canadian dollar hits near one-year low as oil prices slide

TORONTO (Reuters) - The Canadian dollar weakened on Friday to the lowest in nearly a year against its U.S. counterpart, as U.S. oil prices tumbled nearly $2 a barrel and domestic data showed a surprise drop in manufacturing sales.

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

The price of oil, one of Canada's major exports, fell ahead of an OPEC meeting in Vienna next week. U.S. crude CLc1 prices settled 2.7 percent lower at $65.06 a barrel.

“We could see a production hike from Saudi Arabia, which could take an awful lot of froth out of the oil price and that is weighing on the Canadian dollar,” said Michael Hewson, chief market analyst at CMC Markets (UK).

“Disappointing” manufacturing data also pressured the currency, Hewson said.

Canadian manufacturing sales fell 1.3 percent in April from March as maintenance shutdowns cut output at oil refineries, Statistics Canada data indicated. Analysts in a Reuters poll had forecast a 0.6 percent increase.

Separate data from the Canadian Real Estate Association showed that resales of Canadian homes fell in May to the lowest level in more than five years.

At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading 0.6 percent lower at C$1.3185 to the greenback, or 75.84 U.S. cents. The currency touched its weakest level since June 27, 2017 at C$1.3202.

For the week, the loonie fell 1.9 percent.

Global stocks fell as U.S. President Donald Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, and the smoldering trade war between the world’s two largest economies showed signs of igniting as Beijing immediately vowed to respond in kind.

Canada runs a current account deficit, so its currency tends to weaken when risk appetite sours. The country has its own trade feud with the United States and is also in slow-moving talks with the U.S. and Mexico to revamp the North American Free Trade Agreement.

Still, speculators have cut bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of June 12, net short positions dipped to 14,988 contracts from 16,039 a week earlier.

Foreign investment in Canadian securities reached a five-month high in April as non-residents targeted the bond market after four straight months of divestment, Statistics Canada said.

Canadian government bond prices were higher across a flatter yield curve, with the 10-year CA10YT=RR rising 39 Canadian cents to yield 2.225 percent.

Reporting by Fergal Smith; Editing by Bernadette Baum and David Gregorio