C$ retreats as US$ rallies, risk aversion

TORONTO: The Canadian dollar fell on Monday against a rallying greenback, which posted broad gains against most currencies following a report that investors expect the US Federal Reserve to keep interest rates lower for longer than expected.

Investor risk aversion rattling global markets and softer crude prices also pressured the Canadian dollar.

Investors expect the Fed to keep interest rates lower for longer, and to raise them more slowly, than the makers of U.S monetary policy themselves expect, according to the report by the San Francisco Fed.

Scotiabank chief currency strategist, Camilla Sutton, said the US dollar moves accelerated during the North American session particularly in the afternoon after the San Francisco Fed report.

"It's a broad based US dollar move. Today was all about the US dollar and very little about CAD," said Sutton.

The Canadian dollar finished the session at C$1.0973 to the greenback, or 91.13 US cents, weaker than Friday's close of C$1.0881, or 91.90 US cents.

The Canadian dollar also suffered from the overhang of disappointing labor market data last Friday that showed the Canadian economy unexpectedly shed jobs in August.

Data released Monday morning showed the value of domestic building permits had a surprise surge in July, but that did little to stem the loonie's weakness.

The greenback began the day strongest against sterling, which dived to its lowest in nearly 10 months after a poll for the first time showed Scotland was ready to vote to break up its three-century-old union with the rest of the United Kingdom.

"It's another disruptive event out there," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto, said of the Scottish vote.

The US dollar also hit a six-year high against the yen and a more than one-year high against the euro.

Canadian government bond prices were mostly weaker across the maturity curve, with the two-year down 1.5 Canadian cents to yield 1.123 percent and the benchmark 10-year down 19 Canadian cents to yield 2.14 percent.