Canada's dollar fell against the U.S. currency on Monday as doubts about the economic resilience of the United States weighed, sending oil prices lower and boosting risk aversion. The price of U.S. crude oil slid more than 1 percent to settle at a two-week low of $99.01 a barrel on worries of slowing economic growth prospects. [O/R] [ID:nN06282849]
Canada is the No. 1 oil exporter to the United States, which absorbs around three-quarters of all Canadian exports and is the country's largest trading partner by far. "Canada is so tied into the U.S. economy that any weakness in the U.S. economy is by fault weakness for Canada and so the market plays the Canadian dollar on the back of that," said Camilla Sutton, chief currency strategist at Scotia Capital.
The Toronto Stock Exchange's main index tumbled 1.47 percent on Monday in a broad-based decline led by energy producers and Wall Street's benchmark S&P 500 index hit a more than two-month low on global growth concerns. [.TO] [.N] Sutton pointed to a string of weak U.S. data, topped off by a report on Friday that showed U.S. nonfarm payrolls rose far less than expected in May and the U.S. jobless rate climbed to 9.1 percent. The Canadian dollar sank to its weakest level since March 21 after the data was released.
The U.S. dollar rallied in March, but has had a lackluster performance since then and Canada's dollar is one of the only major currencies that has not been able to make up its losses versus the greenback.
The Canadian dollar [CAD=D4] ended the North American session at C$0.9808 to the U.S. dollar, or $1.0196, down from a close of C$0.9783, or $1.0222, on Friday. The currency traded in a range of C$98.16 to C$97.69.
Against the euro, it fell as low as $1.4368, its weakest point since February 2010, before making up some lost ground. Market players have been pushing out their forecasts for when the Bank of Canada will resume raising interest rates as North American economic data has generally disappointed. The
central bank increased rates three times last year, stopping in September at 1 percent. A recent Reuters poll of primary dealers showed that they expect Canadian interest rates to rise in September. [CA/POLL]
A poll a month earlier forecast the Bank of Canada would resume tightening in July. Adding to concerns about the outlook for North American growth, a report on Monday showed that the value of Canadian
building permits plunged 21.1 percent in April. The market had expected a 6.0 percent decline. [ID:nN06254333] The housing report contrasted with data that showed purchasing activity in Canada rose more than expected in May. Economists said that while the manufacturing sector could see continued expansion in coming months, global headwinds would likely temper the growth. [ID:N06273476]
Market players will turn their focus to Canadian data on trade and employment later in the week. [ECONCA] The Canadian government presented its budget after the market close on Monday. The budget was a non-event for the currency market as it was largely the same as the one introduced in March. The minority Conservative government was brought down before that one could be passed. The Conservatives won a majority in the May election and passage of their budget is now assured. Canada's two-year bond [CA2YT=RR] was flat, yielding 1.433 percent, while the 10-year bond [CA10YT=RR] was down 8 Canadian cents to yield 3.005 percent. The move reflected a partial correction from a fairly hefty
rally last week when risk aversion helped power a safe-haven bid for government debt, said Doug Porter, deputy chief economist at BMO Capital Markets.