TORONTO (Reuters) - The Canadian dollar skidded to a lower close versus the U.S. dollar for the 11th time in the past 12 sessions on Thursday and the sudden downturn for the once-resilient currency showed no signs of easing.
Canadian bond prices closed higher across the curve due to slew of factors including a Canadian building permits report that missed estimates and comments from the European Central Bank about weaker economic growth.
The Canadian dollar closed at C$1.0530 to the U.S. dollar, or 94.97 U.S. cents, down from C$1.0477 to the U.S. dollar, or 95.45 U.S. cents, at Wednesday’s close.
After trading in a tight range versus the greenback for most of this year, the Canadian currency has fallen through key technical levels and has been unable to put a convincing end to its slump.
“It’s one of those big turns in market sentiment that is the underlying thing here and I don’t think there is anything specifically related to Canada that is behind this move,” said Shaun Osborne, chief currency strategist at TD Securities.
“After having traded in a very tight range around parity for so long it feels a little but overdue in fact, and I think this probably has a little bit more to run here.”
Concerns about global growth have crimped commodity demand in recent weeks and also weighed heavily on oil prices, which has hurt the Canadian dollar since Canada is considered a key exporter of oil.
But the latest drop in the Canadian dollar was due largely to a rally in the greenback, which hit a 5-1/2 month high versus a basket of major currencies after data that showed a surprise rise in U.S. home sales in June.
The key Canadian employment report due out on Friday may dictate where the Canadian dollar is headed as traders will likely unload the currency if the report fails to meet market expectations.
Canada’s economy is expected to have added 5,000 jobs in June after shedding 5,000 jobs in May, which was the biggest drop since August 2006. The unemployment rate is expected to remain steady at 6.2 percent.
“If we were to see even a modestly softer number the market is going to lean again on the Canadian dollar because that’s the way the market wants to trade at the moment,” Osborne said.
Canadian bond prices all ended higher as data that showed a steeper-than-expected 5.3 percent fall in Canadian building permits in June signaled a downturn for the housing market.
Also helping bond prices was a bleak U.S. jobless claims report and comments from European Central Bank President Jean-Claude Trichet, who said he expects economic growth in the euro zone to weaken substantially this year.
“We did have weak data in the United States and I think there is some trepidation about the jobs number tomorrow,” said Mark Chandler, fixed income strategist at Royal Bank of Canada. “Plus we got bond markets everywhere rallying today so Canada got its fair share of that.”
The two-year bond rose 14 Canadian cents to C$101.71 to yield 2.770 percent. The 10-year bond climbed 49 Canadian cents to C$104.97 to yield 3.642 percent.
The yield spread between the two-year and 10-year bond was 103 basis points, up from 95.2 basis points.
The 30-year bond added 82 Canadian cents to C$115.64 for a yield of 4.073 percent. In the United States, the 30-year Treasury yielded 4.551 percent.
The three-month when-issued T-bill yielded 2.53 percent, unchanged from the previous close.