The Canadian dollar weakened to a near one-week low against its U.S. counterpart on Thursday as the greenback notched broad-based gains and data showed that Canada’s trade deficit unexpectedly widened in January.
The loonie was trading 0.3% lower at 1.3625 per U.S. dollar, or 73.39 U.S. cents, after touching its weakest intra-day level since Friday at 1.3634.
Canada posted a trade deficit of C$3.65 billion ($2.69 billion) in January, up from C$1.3 billion in December, as a sharp drop in the shipment of motor vehicles and parts due to seasonal production stoppages held back exports. Analysts had forecast a C$900 million deficit.
“Despite some temporary factors - weather, auto production disruptions - January’s trade figures were soft against a backdrop of elevated uncertainty,” Shelly Kaushik, a senior economist at BMO Capital Markets, said in a note.
“While higher energy prices will help those exports in the coming months, other trade flows will remain under pressure until a deal with the U.S. is reached.”
The United States-Mexico-Canada Agreement, which has shielded much of Canada’s exports from U.S. tariffs, is set for review by a July 1 deadline.
The price of oil, one of Canada’s major exports, jumped 9.2% to $95.29 a barrel as Iran stepped up attacks on oil and transport facilities across the Middle East.
Surging energy prices sparked worries about import-dependent economies, helping to drive safe-haven demand for the U.S. dollar. The greenback touched its strongest level this year against a basket of major currencies.
Canada’s employment report for February is due on Friday, with economists expecting a jobs gain of 10,000 and the unemployment rate to tick up to 6.6%. The data could guide expectations for next Wednesday’s interest rate decision from the Bank of Canada. Investors have priced in a rate hike this year after the spike in oil prices raised prospects of higher inflation globally.
Canadian bond yields rose across the curve, tracking moves in U.S. Treasuries. The 10-year was up 2.2 basis points at 3.509%, after touching its highest level since July at 3.519%.