The Canadian dollar CADUSD fell against its broadly stronger U.S. counterpart on Wednesday, giving back some recent gains as the prospect of a global economic slowdown weighed on investor sentiment.
Stocks on global indexes mostly declined and the safe-haven U.S. dollar climbed against a basket of major currencies as Federal Reserve Chair Jerome Powell said there is a risk the U.S. central bank’s effort to tame persistently high inflation with interest rate hikes will slow the American economy too much.
“A turn lower in global demand has historically been bad news for the CAD,” Bipan Rai, North America head of FX strategy at CIBC Capital Markets, said in a note.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to prospects for economic growth.
U.S. crude oil futures settled down 1.8% at $109.79 a barrel as worries about a weaker global economy offset data showing a weekly drawdown in U.S. crude stockpiles.
The Canadian dollar was trading 0.2% lower at 1.2895 to the greenback, or 77.55 U.S. cents, following three straight days of gains.
It traded in a range of 1.2845 to 1.2899, after touching on Tuesday its strongest intraday level in more than two weeks at 1.2816.
Canada’s economic growth is expected to outpace growth in other G7 countries this year, helped by surging oil and wheat prices.
On Thursday, Canada is due to release gross domestic product data for April.
Canadian government bond yields eased across much of a flatter curve, tracking the move in U.S. Treasuries. The 10-year was down 3 basis points at 3.304%.
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