The Canadian dollar weakened against its U.S. counterpart on Friday, giving back much of this week’s gains, as investors worried about delays over a U.S. fiscal package and the risk of Britain leaving the European Union without a trade deal.
Global equity markets fell after U.S. House of Representatives Speaker Nancy Pelosi raised the possibility of stimulus negotiations dragging on through Christmas. Also weighing on stocks, European Commission President Ursula von der Leyden reportedly told the bloc’s 27 national leaders that Britain is now more likely to leave the European Union’s orbit on Dec. 31 without a trade deal than with an agreement.
Canada runs a current account deficit and is a major producer of commodities, so the loonie tends to be sensitive to the global flow of trade and capital.
U.S. crude prices were down 0.1 per cent at $46.72 a barrel, while the Canadian dollar was trading 0.3 per cent lower at 1.2771 to the greenback, or 78.30 U.S. cents. For the week, it was up 0.1 per cent, its fourth straight weekly advance.
On Thursday, the loonie touched its strongest level in more than 2-1/2 years at 1.2702 as investors bet that the rollout of COVID-19 vaccines would boost the global economy next year.
Canada on Wednesday approved its first COVID-19 vaccine.
Still, the Bank of Canada could lower already record low interest rates if a second COVID-19 wave leads to more scarring, Deputy Governor Paul Beaudry said on Thursday, though he later added such a move was “just a possibility.”
Canadian industries ran at 76.5 per cent of capacity in the third quarter of 2020, up from an upwardly revised 70.7 per cent in the second quarter, Statistics Canada said on Friday.
Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 2 basis points to 0.715 per cent.
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