The Canadian dollar weakened to its lowest level in more than two weeks against its U.S. counterpart on Thursday as the greenback broadly climbed and optimism faded for a near-term resolution to a trade dispute between the United States and China.
The United States and China are a long way from resolving trade issues, but there is a fair chance the two countries will get to a trade deal, U.S. Commerce Secretary Wilbur Ross said.
Canada exports many commodities, including oil, so its economy could be hurt if the trade dispute drags on.
“In a weaker global economy, the U.S. dollar always strengthens into that and Canada is on the opposite side of that trade,” said Rob Edel, chief investment officer at Nicola Wealth Management.
The U.S. dollar climbed against a basket of major currencies after European Central Bank President Mario Draghi said economic risks have moved to the downside, pressuring the euro.
The price of oil was boosted by the U.S. threat of sanctions on Venezuela, but gains were capped by record high gasoline inventories and an unexpected big build in crude stocks in the United States. U.S. crude oil futures settled nearly 1 per cent higher at $53.13 a barrel.
At 3:16 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3352 to the greenback, or 74.90 U.S. cents. The currency touched its weakest level since Jan. 7 at 1.3375.
The 17-day low for the loonie comes after a string of weak domestic data this week prompted some economists to project a November contraction in Canada’s economy.
“It (the Canadian dollar) is trading below where you would expect it to, but based on the trends and this overleveraged consumer I don’t see a lot of momentum for it,” Edel said.
Canadians have taken on record amounts of debt in recent years, which has helped fuel a rapid rise in real estate prices.
But the housing market has softened since the start of 2018, weighed by tighter mortgage rules and interest rate hikes from the Bank of Canada.
Chances of further tightening by the summer have fallen to less than 30 per cent from more than 50 per cent at the end of last week.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The 10-year rose 30 Canadian cents to yield 1.935 per cent.