TORONTO: The Canadian dollar lost a significant chunk of the hefty gains it made the previous day against the greenback on Thursday as market participants bought back the US dollar and as crude prices softened.
The US dollar had tumbled against a range of currencies on Wednesday after the US Federal Reserve gave a much more cautious statement on raising interest rates than anticipated.
"(Yesterday) was a large 2.2 percent move in the Canadian dollar against the US dollar. We've rewound about half of that - that was actually a pretty sharp correction," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
He noted, however, that the Fed's stance is still tighter than the Bank of Canada's.
"You have two central banks, both in data-dependency mode, one with a tightening bias, and one with an easing bias," he said. "Ultimately, it's going to weigh on Canadian dollar, especially with softer oil prices."
The Canadian dollar, which was performing more robustly than many of its peers, was trading at C$1.2717 to the greenback, or 78.63 US cents, more than 1 percent weaker than Wednesday's close of C$1.2570, or 79.55 US cents.
The currency was also hurt by another drop in the price of oil, a key Canadian export. Brent crude slipped below $55 a barrel after Kuwait said OPEC had no choice but to keep production steady, renewing market concerns about a global oil surplus. US crude sank nearly 4 percent to below $43, near six-year lows.
Canadian government bond prices were higher across the maturity curve, with the two-year up 2 Canadian cents to yield 0.474 percent and the benchmark 10-year climbing 9 Canadian cents to yield 1.314 percent.
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